You can actually limit trading mistakes with price action trading strategies if you are disciplined enough to follow the rules properly. The reason this is possible is because if you are following the price action, then you are not trying to pick tops and bottoms, and instead, you are waiting on the proper set ups and for prices to come to you. Most traders chase the market and get trapped long at the highs or trapped short at the lows. If you want to stop the madness and learn how to follow the price action and actually wait on the trades to come to you, then this article will be of interest to you.
Another Important aspect in day trading that we can teach you is the proper way to trade a range day. Trading range days are very easy to trade if you know and understand price action. However, if you do not understand how prices react, then you will get chopped to pieces on a trading range day. Studies have actually shown that prices are in ranges more times than not, and they only really trend a small percentage of the time, so understanding ranges and what prices are doing when they are in a range is critical to trading success. Don’t risk your trading future to a lack of knowledge about how prices react in a range any longer.
Generally it is a traders emotions that will cause them to make mistakes most often, and we have several good articles posted here on our site about learning to control emotions, so be sure to read them when you have time. While learning to control emotions is probably the biggest hurdle to successful day trading, you still won’t make money day trading if you do not understand how to read a price chart. In order to learn how to read a price chart, you must first have an understanding of why prices do what they do, and how prices react when they reach certain places on a chart. This might seem very trivial, but it is a key step in a trader’s quest to become a profitable day trader, so be sure you give it the necessary attention it needs.
Take a look at the excerpt below that I took from a recent article I read on reducing mistakes while day trading. This article was found at www.bankrate.com and had the following to say about limiting trading mistakes.
Day trading sounds so easy, doesn’t it? After all, isn’t it just sitting at your computer all day, buying and selling stocks — and piling up profits? Well, not exactly. Few people realize how much experience and skill is needed to make money as a day trader. It’s easy to get tripped up by mistakes, especially during your first year.
Here are 10 of the most common errors many day traders make.
Not having a plan
“The most common mistake traders make is entering a trade without a good plan,” says Toni Turner, author of “A Beginner’s Guide to Day Trading Online.”
“Nearly every mistake can usually be traced to trading without a plan.” Too many rookie day traders enter the market without appreciating that they are wading into potentially dangerous waters. Protective planning against losses means determining your entry price for buying a particular stock, your exit price and an escape price — also known as a stop loss.
One of the most common day-trading errors is chasing a fast-moving stock on the way up or down. More than likely, this could lead to an unprofitable trade. “When we see a stock go higher and higher, we all want to join in the celebration,” Turner says. “The problem is that experienced traders are going out the back door while new traders are coming in.” If you miss a stock on the way up or down, let it go. There will be other trading opportunities.
Listening to tips
At least once, nearly every trader gets fooled into buying stocks based on tips from persuasive sources. Even when the tipsters are right, they aren’t there to tell you when to sell. It takes a lot of self-control to keep your ears closed, but successful day traders rely on their own judgment — not on what others are saying. You can read the rest of the original article here.
I only pulled a few of the tips from the original article, so be sure to click over and read the entire article, as the writer (Michael Sincere) does a good job of covering some of the key trading mistakes that many day traders tend to make. This guy is talking about trading stocks, but that also translates to Forex, equities and any other market that can be charted and traded, so the data is certainly transferable to all forms of day trading.
Notice how he talks about chasing trades, which is why many traders actually fail, and once you understand price action, you should at least have enough general knowledge about trading to realize what a flawed strategy and trading mistake you will be making if you “chase a trade!” However, this is where learning to control your trading emotions comes into play. Even though you may have the knowledge that chasing trades is a bad way to trade, can you dig deep enough to find the discipline to not chase trades. You may say unequivocally that this is not a problem for you, but my guess is that you are only fooling yourself, because almost everyone has discipline problems that plague their trading. In your case, it might not be an issue with chasing trades, but rather it’s a problem with moving your stops and giving trades more room. Whatever your vise may be, it is likely a direct relation to discipline or lack thereof.
The main two points I want to leave you with in this article is that you must find a solid trading plan, which we believe is price action trading, and then learn to control your emotions. Both pieces are critical to your success and neither one really takes precedence over the other, so work on them both every single trading day. If you are interested in learning how to limit trading mistakes with price action trading strategies, then you can find more information on how to do that at http://priceactiontradingsystem.com/pats-price-action-trading-manual/.