If you want to be a consistently profitable day trader, it is imperative that you understand that the failure to have strict entry and exit rules leads to day trading losses. It’s truly amazing how many times I get a message or email from someone that is struggling with their price action day trading, only to find out that they are not following the rules properly. If I ask them, they will swear that they are doing everything properly, yet they continually lose? In the end, I usually find out that they are not following the rules as we teach them. Let me say this as plainly as I can. We have perfected our price action rules, so you can not change them or alter the key steps even slightly or you will suffer the consequences, which is losing trades.
Most all losing and improperly trained day traders suffer and lose money due to the single fact that they buy high and sell low, when what they really need to be doing is selling high and buying low. Common sense tells us that we need to see prices moving strongly up before we buy, or strongly down before we sell, but that’s also why most traders lose money, because common sense does not always work in the markets. What a trader must do is train themselves to buy pullbacks in an uptrend, and sell pullbacks in a down trend. In the end, we are looking to buy support and sell resistance, and it’s actually that simple, in a complicated kind of way! However, it’s very hard for an untrained trader to buy into a falling market or sell into a rising market, which is what one must learn to do in order to be a consistent scalp trader.
I say this is easy in a complicated way, because there is a host of special rules that we must apply to all of our thinking and charts as the price action prints to them. Most traders are simply pattern traders, and they look for certain high probability patterns to form, and then they just trade them. By taking this one step further, and applying our price action strategies, we filter our trades and improve our winning percentages much more than most will believe. Rather than simply looking for patterns, we are actually looking for them to form at certain places, specifically strong support and resistance areas. A perfect short pattern might form on your chart, but if it forms at strong support, we are not very interested in it, as the odds are that the shorts will get trapped at the lows. If we see that same short pattern form at strong resistance, then we are probably all over it, as the odds are with us that the resistance will act as a shield for our stop loss and it will also help push prices lower in our favor.
I want to take this even one step further and make it clear that not only are we looking for these patterns to form at certain locations, it is just as imperative that we enter exactly where we are supposed to enter, and not a single tick later. Our price action strategies will often catch huge moves, but the majority of our set ups are only looking for a guaranteed four tick scalp. It is truly odds defying as to how often our entries will get just enough movement to get our four tick scalp before prices reverse and go in the opposite direction. This means that if the trigger price of our trade is at 1600.00, then you can’t enter at even 1600.25, because if you do, you might come up a single tick short and what would be a winning trade now becomes a loser. I see this happen every single day, so I can tell you how important it is for you to enter at the proper place.
In return, if many of our set ups get only the specific number of ticks and not a single extra tick, then it also stands to reason that you must exit at exactly the right place as well. Again, if we enter at 1600.00, then we must exit our scalp at 1601.00 and not a tick later, or else we risk allowing a winning trade to turn into a loser. Many times I find that traders find the correct entry points, but they want more confirmation that they are right, so they wait a few more ticks and then enter late, but by the time they enter late, the move is already over. You must enter at the exact trigger point or earlier through the use of limit orders, but also never enter prior to the trigger either, as that’s another important rule that we MUST follow!
In the end, you can alter the way you handle your stops and targets on runners, but you can never compromise the rules on the scalp portion of our trading rules, as a failure to have strict entry and exit rules leads to day trading losses. I’m hoping that by discussing this today, that many of you will quickly understand if you are guilty of this, and by adhering to these very simple rules, you could suddenly improve your trading enough to actually become profitable as a day trader. If you have never studied or traded with pure price action, then you are at a disadvantage to any and all traders that do know how to read a price chart. If your desire is to become a consistently profitable day trader, then you can learn more about how we trade with price action by going to http://priceactiontradingsystem.com/pats-price-action-trading-manual.