$9500 Simple Price Action Trade 16 Minute Video

Price action is the best indicator. Pro traders love to trade only price action. Yes only price action. What this means is they don’t use any other indicator like the Stochastic or MACD.  Most of these indicators are based on moving averages. Moving averages just average the past price over a time period. For example a 30 period moving average averages past 30 candles. The longer the time period, the smoother the moving average. But longer period moving averages respond very slow to recent price changes. Most of the time, we are using the moving average only to smooth price action. In the video below Dale Woods explains how he trades with simple price action and support and resistance. Did you read the post on a GBPUSD trade that made 60% return in 24 hours?

Support and Resistance Levels

Support and resistance is an important concept when it comes to price action trading. Support and resistance are those levels where price reversed direction in the recent past. Support is that level where buying pressure caused the price to reverse direction from down to up. Resistance is that level where selling pressure in the market caused the price to change direction from up to down. Market seems to have a short term memory. These are the levels that you need to watch as price can again reverse around these levels.

The art of price action trading lies in correctly identifying these support/resistance levels. The high and low of monthly, weekly and daily candles are good support/resistance levels. Each Sunday you should open the chart and draw these support and resistance lines using the monthly, weekly and daily timeframes. Monthly and weekly reversal levels should be given more importance.

Candlestick Reversal Patterns Are Important Signals

Candlestick patterns are great when it comes to predicting price reversals. Candlestick patterns are leading signals that tell you what the market will do in the immediate future. On lower timeframes price action signals are not that accurate. But on higher timeframes like H4 and daily, candlestick patterns are pretty accurate. In the above video you can see pro traders trade solely based on price action and candlestick patterns. Did you watch the video on the day in the life of a professional trader?

Pro traders look for levels where price can reverse. As said above you should have identified support and resistance levels on your chart using monthly and weekly timeframes where price reversed itself in the recent past. One you draw these support/resistance levels on the chart, you can now switch to your timeframe of choice which should be either daily or 4 hourly. When price reaches near any one of these levels, if you find a candlestick reversal pattern forming, it is a good entry signal.

Risk Management Is Very Important In Trading

Risking $50 on a $500 account is a very bad policy. Risking $50 on a $500 account means risking 10% of your account on a single trade. Losing this trade will take the account equity down to $450. Now you need to make $50 to recover the loss. So always follow risk management strictly. Don’t try to risk too much because it you loss you will have a huge drawdown to your account equity. Small wins over time will add up to a big sum over a few months time.

In the above video you can see Dale Woods shows you his real account when showing the charts. When you are trading, always keep risk management in front of you. If you have $500 in your account, you should only risk 2% on a trade which means you can only open a trade with $10 stop loss. Yes you will only open a trade with $10 stop loss. Always be consistent in choosing only those trades that have at least 2:1 reward to risk. What it means is that if you find an high probability trade setup that gives you a 2:1 reward to risk ratio and the stop loss is 30 pips. You are going to open the trade with a position size of 0.04 lot which is going to give you a risk of $12 on a $500 account. 2:1 reward to risk means you are expecting to make 60 pips risking 30 pips. 60 pips means a profit of $24. After winning the trade you will have $524 in your account. In 5 days of trading if you daily win 60 pips, your account will become $620. This translates into a return of 20% in a week which is not bad.