My goal today is to show you how I evaluate my price action trading chart at the start of each trading day. This is a very important step and many price action students simply do not understand how important this part of your trading day is really, so hopefully this post will help you to see the steps clearly while also helping to emphasize it’s overall importance to your day trading results. Most of the information on evaluating your price action chart will be in the included video at the end of this post, but be sure to read the entire post as well, as it will lead you into the video and should be part of the overall price action lesson as well.
The first thing a day trader must do each morning is to determine the type of trading day that is setting up, and then find the key price areas that we will be watching. Until that happens, any trades will likely be based on a roll of the dice, and that is nothing more than gambling. If you are gambling in the markets, then you are sure to be a loser in most cases. Yes, you may get lucky on occasion, and you may even have some lucky streaks, but in the end, we do not want to be gamblers, because most gamblers end up on a sad losing streak at some point in their careers, so in order to avoid that problem, we can not be market gamblers.
We want the odds on our side, and we want a very clear understanding of what is transpiring on the chart as prices print to it. With all of the many thousands of hours of chart time I have personally, I still have moments when I don’t quite understand or know what is going on with the price action. This is not often, but it is true all the same, and when I am confused or uncertain at any time during the trading day, I do not take trades. By taking this stance and staying disciplined in my trading and sitting idle until I figure things out again, I do not gamble and take “blind entries” into the market. I do not get caught off guard very often by taking this stance, and most all of my trades are very calculated entries that I feel confident in taking.
Most traders don’t have this discipline, nor do they realize how important it is to their trading results. 90% of all day traders are losing money, or at least that’s the common number that is universally agreed upon as an accurate estimate. What that means is that 90% of all traders don’t understand price action or what’s going on when they are trading. These 90% are pure gamblers and they usually lose money on most trading days. No, they don’t see themselves as gamblers, but if they don’t understand how to read a price chart, then they are gamblers whether they know it or not! Our goal here at Price Action Trading System is to help you learn to read a price chart and to help you learn that you can not gamble in the markets and make money on a consistent basis.
When you truly began to understand price action and you actually learn to understand what is happening with prices as they undulate across your chart screen each day, you will slowly start to see that you can indeed begin to know what is about to happen short term on your chart with a very high rate of accuracy. We are honing in on consistent 90% accuracy rates for 1 to 3 point moves in the ES, which is more than adequate to make money day trading. You can not average 80%+ win percentages for multiple years based only on luck. It takes skill to hit those kinds of win rates, and with some of our traders easing close to 90%+, then it’s more than obvious it’s a skill and not based on pure luck or gambling.
If you want to make money as a day trader, there is only one way in our opinion, and that’s by learning how to read a price chart, which is what we call price action trading. We don’t use indicators to tell us when to enter a trade, nor do we think most indicators will work in the long run either. We know for a fact that some professional traders actually fade indicators, because they know so many weak handed traders are using them to make trade entry decisions. When we say “fade,” we simply mean that if the indicator says to enter long, the pro traders are taking a short position. Trust me when we say this: The only way to make money in the markets is to learn how to read a price chart!
If you want to learn how to read a price chart, then spend some time studying our website and our information here. You should also take a look at our price action manual located at (http://priceactiontradingsystem.com/pats-price-action-trading-manual/) if you want a head start that will put it all together for you in simple and easy to understand day trading terms. It’s still going to take a lot of hard work and study time, but by having all of the information together in one easy to understand manual, you will get off on the right start that much quicker. Don’t forget to watch the video below, as it will show you how I evaluate my price action trading chart at the start of each trading day. If you take our stance of only entering a trade when you completely and fully understand what is going on with prices as they print to your chart, you will quickly improve your trading results for the better.