Price Action Trading Rules

While most day traders have heard about price action trading, most don’t really understand the full meaning of the term.  Many people think that price action trading involves watching for certain chart patterns only, but that is far from the truth.  While we are interested in certain chart patterns, we do follow a list of rules as well, so yes indeed, you must learn our price action day trading rules in order to become a successful price action day trader.  Learning to trade with price action is really nothing more than learning to read a price chart, and like most things in this world, prices do tend to have certain tendencies that that they follow, so thus the creation of our price action day trading rules.

Price Action Trading Rules
Price Action Trading Rules

While these trading rules are not written in stone like some of the laws of physics might be, they do happen so often that they are reliable enough to know and understand.  After all, the only thing a true day trader needs to make money is a slight advantage, and by learning to read a price chart, you will have an advantage over most other traders.  Many people will tell you that day trading or any trading is simply gambling, but we would argue vehemently against that statement.  When we enter a trade, we are never gambling.  By learning price action and follow a list of rules, we only enter the market when the odds are stacked highly in our favor.

In fact, as a gambler, all you need is a mere 1 to 1.5% advantage over your opponent to make money.  After all, that’s how the casinos make money.  If gambling was a chance game, do you think the casinos would make money in the long run?  Sure, they lose bets and they pay out big prizes on many occasions, but over the long haul, they have at least a 1% or better advantage, and this small advantage allows them to make a lot of money.  Without that advantage, they would not stay in business very long.  Trading is no different really.  If you learn how to read a price chart and you learn how to trade successfully, you will have an advantage of much more than 1 or 2%.  We have found that our price action trading strategies give us a 70 to 80% winning average, so we have a huge advantage.  Some of our traders even reach 90% wins, even though we have been told this is impossible on many occasions.

In addition to our price action day trading rules, there are also some basic day trading rules that everyone must know and follow in order to be successful in the long run.  We found an article at that discuses some of the most basic trading rules, and below is an excerpt from that article.

If you are going to day trade, it’s essential to have a set of rules to manage any possible scenario. Even more important, you must also have the discipline to follow these rules.

Sometimes, in the heat of battle, traders will throw out their own rules and play it by ear — usually with disastrous results.

Although there are many rules, the following are the 10 most important:

1. The three E’s: enter, exit, escape

Rule No. 1 is having an enter price, an exit price, and an escape price in case of a worst-case scenario. This is rule number one for a reason. Before you press the “Enter” key, you must know when to get in, when to get out, and what to do if the trade doesn’t work out as expected.

Escaping a trade, also known as using a stop price, is essential if you want to minimize losses. Knowing when to get in or out will help you to lock in profits, as well as save you from potential disasters.

2. Avoid trading during the first 15 minutes of the market open

Those first 15 minutes of market action are often panic trades or market orders placed the night before. Novice day traders should avoid this time period while also looking for reversals. If you’re looking to make quick profits, it’s best to wait a while until you’re able to spot rewarding opportunities. Even many pros avoid the market open.

3. Use limit orders, not market orders

A market order simply tells your broker to buy or sell at the best available price. Unfortunately, best doesn’t necessarily mean profitable. The drawback to market orders was revealed during the May 2010 “flash crash.” When market orders were triggered on that day, many sell orders were filled at 10-, 15-, or 20 points lower than anticipated. A limit order, however, lets you control the maximum price you’ll pay or the minimum price you’ll sell. You set the parameters, which is why limit orders are recommended.

4. Rookie traders should avoid using margin

When you use margin, you are borrowing money from your brokerage to finance all or part of a trade. Full-time day traders (i.e. pattern day traders) are usually allowed 4:1 intraday margin. For example, with a $30,000 trading account, you’ll be given enough buying power to purchase $120,000 worth of securities. Overnight, however, the margin requirement is still 2:1.

We only posted a small portion of the article, so be sure to go read all ten of the rules that they talked about, as we agree with all of them.  While these rules don’t necessarily cover all of the price action rules, they are all very good rules that we believe are important to your day trading success.  When you combine these rules with our price action trading rules and the ability to read a price chart properly, you will quickly find that your trading results will improve exponentially.  The one thing that many traders find difficult is sticking to any kind of trading rules, so if you can over come the mental hurdle of trading, which is the hardest part of learning to trade successfully in our opinion, you will be on the road to finding success with your day trading.

If you would like to learn our price action day trading rules and price action day trading strategies, then spend some time on our website exploring our posts and videos.  You can sign up for our free youtube chart lessons as well, as we do a video chart lesson on the ES or Mini S&P every trading day and post that video for our students.  It’s free, and all you have to do is go here to sign up.

Find out why price action day trading is the only way to make money consistently in today’s markets at

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Terry Steiner August 21, 2012 at

Hi Mac, love your videos and your easy to understand method of trading. Anyway, I too was fooled today on that strong bear trend and kept looking for buy entries at every support level, fortunately I didn’t lose any money. Thanks again for sharing, Terry


    Mack August 22, 2012 at

    The ES will do that to you. It will lull you to sleep and just when you think you have it figured out, it will completely change again and catch you off guard if you are not paying attention. Even when you see it, your mind will trick you into not seeing what’s really going on with the chart. Follow your eyes only and go with what the chart is telling you, even if it feels wrong in most cases.


Brian A . September 3, 2012 at

Hey Mac,Just a few questions about the price action system you use.Does this work on markets like Crude Oil,Natural Gas,FX FUTURES,or Grains like Corn or Wheat FUTURES? And do you only use 1 time frame? Thanks for the videos,I am interested in learning more about this system you have. Brian


    Mack September 10, 2012 at

    Yes, price action works well in any market that can be charted. Each market may have a different size tick chart that we would use though, so no, you don’t use the same time frame chart if you are using tick charts, which we always suggest whenever trading price action strategies.


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