I am going to show you a secret today that will simplify your ability to use price action trading strategies in day trading the ES or any other market for that matter. What most traders fail to recognize is that you can actually simplify price action day trading strategies by using trend lines. I’m sure you have already heard that “the trend is your friend,” as that single quote has been around forever, and we hear it quoted more than any other trading quote used in the trading business. There is a reason you hear this quote so much, and it’s because it really is a very wise trading rule. A rule that we believe in strongly here at Price Action Trading System, so you will hear us talk about it often as well.
Even though we are told to follow the trend, and even though we can show you very simple trading strategies using trend lines to make money as a trader, it’s amazing how many traders are completely unaware of these strategies. The reason is because it appears too easy, which it is actually a very easy to use strategy that works extremely well. Trading is not really that difficult, but it is perceived as being very difficult, so any strategy that is very simple is also perceived as a waste of time. Most new traders believe that there is a secret to profitable trading that only a rare few understand or have access to, so they are looking for some super secret and super sexy strategy that is sure to be the “key” or “holy grail” to trading profits.
I can assure you that this “holy grail” does not exist and that the key to profitable trading is to learn to understand what the market is doing, and then to learn to spot in advance where the best or most profitable entries are expected to occur. You often will get one or more hours of advanced notice of where these entries will occur, but you have to know and understand what to look for in advance to be prepared to trade them. It’s not always extremely easy to find the trends or trend lines, but if you can find them, they will alert you of where to expect to find solid trade entries. Don’t waste your time and effort on those sexy sales pages and products that you will see advertised all over the Internet, because they will be a wast of your time and money.
If you believe that I’m the only one that thinks like this, then think again. Here is an excerpt from an article I found recently at www.marketoracle.co.uk, and this group seems to have the same ideas as I do about trend lines.
“How to draw a trendline” is one of the first things people learn when they study technical analysis. Typically, they quickly move on to more advanced topics and too often discard this simplest of all technical tools.
Yet you’d be amazed at the value a simple line can offer when you analyze a market. As Jeffrey Kennedy, Elliott Wave International’s Chief Commodity Analyst, puts it:
“A trendline represents the psychology of the market, specifically, the psychology between the bulls and the bears. If the trendline slopes upward, the bulls are in control. If the trendline slopes downward, the bears are in control. Moreover, the actual angle or slope of a trendline can determine whether or not the market is extremely optimistic or extremely pessimistic.” You can read the rest of the original article here.
And then there is another nice article on trend lines at www.investinganswers.com, and this is a small excerpt form their website.
In today’s lesson, I’m going to work with you on the idea of trend and how to draw trendlines. When I taught stock market seminars, I often held a free one-hour class called “The Power of Trendlines.” I knew that in just one hour I could leave people with a concept that would greatly improve their stock market trading. So even if they choose not to attend the full seminar, they still gained a technical analysis tool they can profitably use forever.
This one-hour class would typically draw an audience of 70 to 80 people per session. I would start by asking the group how many people hadmoney in the stock market. Virtually all the hands went up. I would then ask how many people had drawn trendlines on the charts of stocks they owned within the last month. Perhaps three or four people would raise their hands. Most people, I learned, while aware of trendlines, were neither clear about how to draw them, nor did they fully understand and appreciate the importance of doing so on a regular basis. You can read the rest of the original article here.
There are a multitude of other websites out there that will say the same positive things about trends, and they all agree with me in regards to the simplicity of trading off of a trend line. However, if you try to find anyone teaching a simple trading strategy using trend lines, you will have little success other than just some basic talk about how important the trend lines are to your trading. As stated previously, I believe this is because it appears to simple, and it is not sexy enough. Sexy sales and boring does not sell, and people only want to sell what the buyers want, so it’s a vicious cycle that leads most traders down a path of quick failure when it comes to trading.
If you want to learn how to use a trend line, then you will want to learn more about our price action trading strategies. These strategies are based on learning to read a price chart, how to determine what prices are doing, and most importantly, if trending, learn how to spot a trend line and use it to your trading advantage. Below is a copy of my trading chart from today. Notice that I chose today’s chart so that you do not think that I just randomly picked a nice looking chart for my example. I always use the same day trading chart when I post examples, but that’s because our strategies work, so I don’t have to search out examples. They appear on our charts every day, so I can always choose the same day’s trading charts when I want to find a nice example using our trading strategies. Notice on the chart below where the best entries are located. They are at the trend lines! I circled them to help you find them easily.
When you combine these trend lines with our additional price action trading rules and strategies, you will quickly improve the odds of your having a winning trade exponentially. Don’t fall for the slick marketing and sales pages that will try and convince you that they have the next or newest holy grail in trading. The techniques we use and teach are the same simple techniques that have been used for decades to trade all of the markets successfully. If you would like to find out how we simplify price action day trading strategies by using trend lines, you can find more information at http://priceactiontradingsystem.com/pats-price-action-trading-manual.