– Where do I start, what is the process to learn price action trading?
The first step is to purchase the Price Action Manual. It has all of our strategies, including the most important piece of the puzzle, our instruction on how to know what prices are doing and where they are likely heading next. Market geometry is real, and we show and prove this every day in our YouTube lessons, and this manual will teach you how we do it. The Price Acton Manual also includes our full scalping strategy along with how we set up our scalp and run technique. While it is not necessary, you can also join the Premium Members Area, but do not make the mistake of joining the members area without first buying the Price Action Manual, as the Price Action PDF is the main learning tool that puts everything together.
– What is in the Premium Members Area and why join that?
The Premium Members area has additional video lessons that compliment what we teach in the Price Action Manual. While it is not mandatory that you join the premium membership to learn our strategies, the feedback has been great and members say that it definitely helps in the learning process to speed things up and clarify how some things are done. Anyone that buys the price action manual can get a $25 discount off of the cost of the membership area, all you have to do is ask for your discount code in advance before joining. To receive your discount code, send an email with your qualifying purchase ID # found on your receipt to Mack at this address.
In addition to the above, you will gain access to our PATs trading support forum where you can ask questions and interact with other students. I also post a daily mid morning copy of my chart in the members area along with some short commentary. The purpose of this mid morning chart is to give you a look at my personal trading chart and to help you to see what I am seeing early in the trading day. Our hope is that by seeing my chart, you will get off to a better start in analyzing your own trading chart each day.
Finally, we post many of our proprietary NinjaTrader charting tools in the members section for free download as a courtesy to our current members.
– I have your Price Action Manual now, what is the learning process?
You should read through the manual multiple times, going back and studying it in sections, as there is just too much to take in with only a read or two. Some of the information may seem trivial or unimportant the first time or two you read it, but as you start to pick up some of the basics, you will then understand that many items you overlooked will now make sense to you.
As you study each section in the manual, go to the articles and video lessons that correspond to that information and review those as well, as you will pick up further information and instructions from them. Our better and most recent video lessons are in the Premium Members Area, but there are a lot of free ones you can read and view as well.
Lastly, trade the simulator as much as possible using live data. Use what you are learning to help you to try and take the right trades and entries, then study your trades diligently at the end of each day. This extra study of your trading day is the key to success really. Learn your tendencies, both good and bad, and use them to improve your trading going forward.
– Why doesn’t my tick chart look like your tick chart?
Tick charts are not static like time based charts, so no two tick charts will look exactly the same. This is not a problem though. As long as your patterns and total number of bars are very close or identical, then that is good enough. Yes, some signal bars may look better on my chart than your chart, but most likely, other set ups on your chart will have better signal bars than my chart, and in the end, it all works out in the wash. Learn more about tick charts and signal bars here.
– Why do you trade with tick charts, and can I trade this technique with time based charts?
We prefer to trade with tick charts because we think we can see many more details within the price action and price structure versus what we can see in a time based chart. Open up a five minute ES chart and a 2000 tick ES chart, and then compare the two. I think you will agree that you can see many more details on the tick chart than you can with the 5 minute time based chart.
If you don’t have tick charts, we believe that we will have a slight advantage over you, but the simple fact is that the price action strategies we teach will work on a time based chart, just like they do on a tick chart. If your charting service doesn’t offer tick charts, you might also consider volume charts, as they are very similar to tick charts and also preferable to time charts in our humble opinion.
– Do I use a 2000 tick chart on any other markets I choose to trade?
No, every market is slightly different, so you have to use the correct size tick chart for each different market. I only trade the ES, so I am not familiar with most of the other markets people ask me about. However, if you want a good starting point, open a 5 minute chart in that market, then try and get your tick chart to look as close to the 5 minute chart, concentrating on the number of bars and somewhat similar patterns and you will be at a good starting point. That is how we do this for any new market. If you are trading the MES, try starting with a 950 tick chart.
– How do you handle the 8 tick safety stop rule when the markets are very volatile and the signal bars are all very large.
The most important part for your safety stop is that is must always go above or below your signal bar. There is a reason we put our stop there, and if you put it any place else, you will usually get stopped out on perfectly good trades, so make sure you always put your stop where it goes, above or below the signal bar depending on entry direction of course. If going long, the safety stop goes below the signal bar and if going short, the safety stop goes above the signal bar.
There are a couple of different ways to handle the large signal bars. You can always skip the entry, but during volatile times you will not get many good entries skipping them. Another way is to wait until the entry is triggered before placing an order, and once the trigger happens, place a limit order further back into the signal bar where you are within the 8 tick rule, yet your stop is above/below the signal bar. Then wait and see if prices will back up and fill your order. This works some times and but often times you will miss the best trades, so it is not optimal.
The most optimal option is to put your safety stop where it goes, then take the additional ticks needed to get it in the right place and add those to your target profit. So if it takes 18 ticks to put your safety stop above or below the signal bar, take the additional 10 ticks it took above our 8 tick rule, and add that to your profit target to offset the additional risk. So instead of scalping out with 4 ticks, our scalp target is 14 ticks. We take the additional 10 ticks we added to our safety stop and add that to our normal 4 tick scalp, for a target profit of 14 ticks.
– Why do you use Japanese candlesticks and do they serve any special purpose? Do we need to study their meanings?
I understand that there is a complete trading strategy behind Japanese Candlesticks, but we do not care about that or their meanings and descriptions, so forget about all of that. As price action traders, we are using our visual training to read the chart, and that is the only reason we use the candlesticks, because they are very visual.
We can glance at the chart and instantly tell if a bar is bullish, bearish or neutral, so they make it very easy to visually see where a bar opens and closes without having to take the time to visually inspect the bar like you would with other types of printed bar charts. A bar can close bullish, bearish or neutral, and Japanese Candlesticks work great for seeing that quickly, and that is all we use them for and all we truly care about in regards to their use. They compliment our visual read of our charts and nothing more.
– What do you mean by the statement that you need a good signal bar to enter a trade?
There are three types of signal bars really. Bullish, bearish and neutral. Avoid neutral signal bars in all cases. Neutral candles are nothing more than a one bar trading range with no sense of direction, and we call these doji’s. They indicate some level of indecision by traders or equilibrium between buyers and sellers.
Entering a trade on a good signal bar simply means you need a bullish signal bar to go long, and a bearish signal bar to go short. Bullish meaning that prices close on or very near the high of the bar, and bearish meaning the bar closes near its low or very near its low. Neutral bars or Doji’s should be avoided as signal bars.
A good rule of thumb to judge if a signal bar is good enough is the 1/3 rule. If a price bar closes in the top 1/3 of the candle, then it is bullish. If the bar closes in the bottom 1/3 of the candle, it is a bearish bar. The closer these bars close to their high or low, the better the candle.
– You mention inside bars a lot, so what is an inside bar?
An inside bar is just as it is described. It is a bar in which both the high of the bar and the low of the bar is inside of the bar just to the left of it.
– When we are counting first and second entries, is the required break above or below the bar counted on a break above the stems of the candlesticks or just the body?
This tends to confuse many new traders, but we use the entire candlestick, including the stems, so to count a break higher/lower, prices must completely tick or move past the entire candlesticks high or low, including the stems or feathers as some often call them.
– Does price action trading work in other markets besides the ES?
Price action works in any market and on any time frame. That includes futures, Forex, other indexes and even individual stocks. And yes, price action works in markets outside the USA as well. The only requirement that we suggest that you remain stringent with is the fact that your market of choice must have sufficient volume so that you do not encounter slippage. Thin or low volume markets are not a good choice when using any type of scalping technique, so keep this in mind. Outside of this volume requirement, you can trade any market and any time frame you choose, and price action will still remain valid. We like and prefer to trade the ES because of the volume and the predictability of it. You can easily trade up to 100 contracts in the ES during regular trading hours and it’s unlikely you will ever experience slippage. Not many markets can handle that type of volume without slippage and your trading actually affecting prices by moving the market with your own orders.
– What do you mean when you say you use a “scalp and run technique?”
Scalp and run is the name we give to our trade entry technique. While we are scalpers first and foremost, we also understand the importance of taking advantage of big moves when they happen. The problem with big moves is you never know when one is coming really, so we use an entry strategy that uses a combination of scalping and swing trading. As an example, we might enter a trade with 5 contracts, and we might scalp out of that trade at four ticks on 3 or 4 of our contracts, then move our stop to break even on 1 or 2 of the remaining contracts in the hopes that we might catch a bigger move. We call this our scalp and run strategy, and the beauty of this technique is that we have no more risk in our trades after only 5 ticks of movement in our favor. Of course, you can choose to be a pure scalper or a pure swing trader, using a combination of different ideas that are off shoots of our scalp and run strategy.
– Why do you scalp for four ticks? Why not scalp for two, five or some other number of ticks?
It actually takes a six tick move to enter on a stop order and then exit a scalp with 4 ticks, so that’s one important reason we choose to go for four ticks. If you study our work, you will find that it is uncanny how often a move will go just far enough to obtain a successful four tick scalp, but if a trader chooses to stay in the trade for even one more tick, it will often turn into a losing trade. Four ticks is a very common scalping target in the ES, so many other traders are seeing the same set ups, and the fact that they are exiting after six ticks (or with 4 ticks of profit) creates enough buying or selling orders at these location to create a self fulfilling strategy.
– Aren’t you concerned that if you share your techniques with too many people that they will no longer work?
We get this question quite often, but frankly, this is of absolutely NO concern at all. The markets are simply too large and too efficient for this to ever be a problem. In fact, if everyone started seeing things exactly like we do, it would only increase the number of traders doing what we do, thus making all of our trades winners. If you truly understand the markets though, you would understand the fallacy of the idea that we might reduce our trade results by sharing our trading strategies. The beauty of price action trading is that a chart actually speaks a language, much like any language, and if you can learn to understand that language, you can improve your trading results exponentially. Think about it like picking up a book that is written in braille. If you don’t know how to read braille, you will have a hard time understanding that book. However, if you are fluent in reading braille, then you will have very little problem at least reading the words on the pages. Reading a chart is very similar, in that you must learn the language of the charts. Once you can read the chart fluently, your trading results will change forever!
– What charting software do you use?
We use NinjaTrader software. We have used NinjaTrader for many years and it a solid choice for serious day traders. This does not mean that other charting software is not a good or adequate choice, but we use and like NinjaTrader since that is what we have used for the last several years. If you need help or assistance with your charting software, unless your question is specific to something we teach, we are limited in what we can do for you. You will either need to check with your charting provider or broker, or if you have questions about NinjaTrader, you can go to the NT website. They have excellent support and some of the best training videos that will teach you almost anything you need to know about the use of the NT charting software. Follow this links Below to the video library for your version.
Understand that you do need good charting, good data and a good reliable high speed internet provider. These are the basic tools we use every day and you can not skimp is this area. If you use a broker that offers free data, then you are not getting the best available data and you will pay for it with more losses, delayed entries and exits and an all around poor experience. Trading is hard enough, so you do not want your tools making it even harder for you.
IMPORTANT NOTE: At one time, you could use NinjaTrader software with any broker that offered it, but that is not the case any longer. We still recommend and prefer NinjaTrader and we still use NinjaTrader, but we bought the software prior to their new changes, so we are not affected by their new rules and we can still trade with their software at our desired broker. Newer users have no option as to which broker they use now. You have to go with the broker options NinjaTrader ofers, so you can not use our group broker and use NT as well if you are a new NinjaTrader user. Make sure you are aware of this change.
– I have always read that your safety stop can not be larger than your profit target, or else money management will not work out and you will end up losing money as a trader. Why do you say differently?
There are a couple of reasons why we teach what we teach. First of all, we agree that if your win rate is less than about 65%, it is indeed true that you can not have bigger losers than you do winners. While a 65% win rate may seem impressive or even un-achievable, we can do much better than that when trading with our price action trading techniques. Most all of our successful day traders have a better than 80% win rate, with some being in the 90%+ win range.
Secondly and most importantly though, we do not actually teach that you should always take a full two point stop. Our two point stop rule is the maximum stop we can use in order to enter a trade, but that doesn’t mean we are saying that you always take a full two point stop. The idea is to keep your stop one or two ticks above or below the signal bar that sets up our trades. Hopefully you can get into most trades with less than a two point stop, so the two point stop rule is simply a maximum stop size we are willing to risk on any single trade we enter.
– How do you set up your Automated Strategies that you are using when I see your live trade examples on YouTube?
We have created an article and a video to go along with it that explains this process. You can find the information on our automated strategies here.
– How long does it take to learn how to trade with price action?
This is a difficult if not impossible question to answer, as everyone learns and processes information at a different level. I can tell you that learning to day trade profitably is not easy, or else everyone would be doing it. It takes a lot of hard work, continued study and as much screen time as you can get simply watching prices print to a chart. What we recommend is that you practice on a simulator trying to put our price action strategies and rules into practice each day. Where you really learn is by studying your trades and chart at the end of each day after trading on the simulator.
You can not take a quick course or read a few books and truly expect to make money in this business. If anyone tells you it is possible to make a living trading by reading a book or taking their short course that lasts a few weeks, then you should move on to another trading idea quickly, because it is simply not possible! It takes a lot of hard work and study, along with a lot of experience before profits will begin to come consistently each day. Most importantly, you must be studying the right materials and the right strategies, because a thousand screen hours learning the wrong things will not make you profitable.
– There are a lot of materials on your website, both free and paid, so how do I more easily sort through all of it?
We have added a new function to help you to find the video lessons and articles in a much more orderly fashion. Look at the top of any page on our website for the link titled “Video Lesson Links.” You will find two tabs at that link, one with all of the free stuff, and one with the paid version of the lessons. Click on the appropriate link button and inside you will find a categorized listing of all videos lessons and articles noted by title. Just click on the one that you want to view.
The other way to search the site is with the search function. Just type in the topic you want and hit the search function and it will return a list of everything available.