Price Action Trading: Waiting For Confirmation
Many aspiring forex traders jump into the market before their entry signal has fully completed or fail to even develop a defined trading plan
. It is crucial to a trader's long-term success that they wait until all their pre-defined parameters are met before jumping into the market. In order to define a trading strategy you must define its entry and exit method. A highly effective and highly adaptable method is absolutely necessary to enable definition of entry and exit and allow for vivid confirmation of signals.
Once traders start jumping in and entering trades before the completion of their specific setup they are essentially negating their entire trading plan. The main point of developing a written out trading strategy is that it is done when you are in an objective state of mind set and are not reacting emotionally to the market. When a trader enters a trade that doesn't fully meet his or her pre-defined criteria they are acting on emotion, these types of behaviors are what get most traders started down the slippery slope of emotional trading.
Employing an easily definable and effective trading method such as price action analysis will allow you to stay calm and wait patiently as your price setup forms and then strike with cat-like precision when the setup is complete.
The problem with many methods that traders use to trade forex is that they have large grey areas, or entry and exit parameters that may change depending on what time frame you are looking at. The beauty of price action setups is that they show you exactly what price is doing and give you a unique perspective to analyze the forex market on any time frame while still remaining relevant. For example, if a price action trader sees a possible pin/reversal bar form on a daily chart the signal will be noticeable on all lower time frames as well. It may be in the form of a 2 or multiple bar reversal on the 4 hour or a head and shoulders on the 1 hour.
The great thing about price action setups is that they generally confirm themselves across all time frames and leave very little to the trader's discretion. Price action signals like any other are stronger on higher time frames and generally will be visually evident on lower time frames as well.
When you trade forex using price action setups you can more readily attain the necessary objective mindset that is required to be consistently successful as a trader. Having a method that is easily definable and inherently reflects the very nature of the market is great tool for any trader. Waiting for a price action setup to confirm itself via subsequent price movement is the best way to be sure you are on the right side of the trade. Many traders rely on indicators which often cover up the underlying price movement and provide them with a false sense of clarity. Take the indicators off your charts and learn a few good price setups and you will see the forex market from a whole new perspective. Patiently waiting for your pre-defined price action setup to confirm itself in the flow of price movement is paramount to any forex trader's long - term financial success.
by: Nial Fuller
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