USING HISTORICAL PRICE ACTION
Why should we look at historical price action?
We need to look left to search for clues on where to enter the market for profitable trades. This can include key levels, where a market has reacted before, and where the instrument is heading towards.
Support and resistance
When looking left we are able to identify the key areas of profit-taking. When a market is trending it is even more important to always look left at the support and resistance levels as they modify. This happens plenty in technical analysis. Previous resistance becomes support. Or the opposite way around – previous support becomes resistance.
Looking left vs indicators
Having too many indicators on your charts might cause confusion where one might provide you with a buy and another one is saying sell. This sort of chart confusion and mess can result in confusion for the trader leading to loss or no trades.
Well, this happens to lots of new traders. They learn as many indicators as can and try to use them all at once. Then, they slap all of them on a chart and think this will equal more profit. This provides them mixed signals, confusing them and causing them to require the incorrect trading positions.
Well, what if I told you that the most effective indicator is price action itself? And better of all, if you wish to use it to make the most of Forex profits, all you would like to try and do is LOOK LEFT!
Supplement your back testing with an occasional amount of indicators.
Now that you just know where to look for in price action to induce entry or exit levels for your trades, you’ll be able to use one or two indicators to supplement your price action strategy.
So, without adding all the confusing indicators in your charting platform for no reason, find an indicator that confirms and compliments your entry and exit levels. Find such an indicator by back testing it along with your new price action trading approach that matches your style. If you get a price action entry idea confirmed by an indicator entry signal, you may increase your chances of profitable trades if it goes in alignment together with your bias.
The earlier you prepare using price action as your main indicator, the sooner you’ll mature as a trader! So, before you’re taking your next trade, remember to look LEFT and remember that price action is that the most significant indicator in the market.
Looking at history increases confidence.
The more ambitious swing traders will look on the largest timeframes looking back as far as possible to search out the largest trades. Whilst it is important to look left on all timeframes and review the value action short term, you must utilise the monthly/weekly timeframes to work out where you’ll hold your trades to. These timeframes are the foremost respected when it involves price action. With some traders able to hold a trade 100 pips some may only get out 30 pips. The most important thing is to journal all of your work and constantly adapt as a trader.
Looking left is the simplest sort of chart breakdowns however such a big amount of miss out on vital info when live trading. Keep the chart clean and look left on the larger timeframes to boost your trading bias and overall performance.