Price action trading is an extremely popular trading strategy among the successful trader. Those who are new to the trading business, always want to trade the market using indicators. They simply install tons of indicators in the trading platform and use a complex trading system. But do you really think such a system will work in the long run? You need to create a simple trading strategy which will allow you to trade the key levels of the market. Let’s dig deep to understand how price action trading really works.
What is price action trading?
Price action trading is based on the Japanese candlestick pattern. The professional traders in Hong Kong use the reliable candlestick pattern to spot the potential reversal and continuation pattern.at the initial stage, things will be really hard but if you focus on the formation of each candlestick things will make sense. Try to learn about the different formations of reversal and continual candlestick pattern. Once you get the basic idea of this market, you can easily make a profit in the long run.
Being a price action trader you should never risk more than 2% of your account balance. The new price action trader always thinks they have the very best trading system in the world and they will never lose. Things go great at the initial stage but soon they blow their trading account. No matter which trading system you follow, you can never risk more than 2% of your account balance. To be precise, it’s better to take a 1% risk in each trade unless you have more than 1 year trading experience.
Trading the lower time frame
Though the price action trading system is a very profitable trading strategy this doesn’t mean you will get quality trades in all timeframes. Instead of relying on the lower time frame, you need to use the daily time frame. Some experts of the CFD trading industry often uses the weekly and monthly time frame. In the higher timeframe you can easily find high-quality trade setups. Most importantly you will be able to maintain a high-risk reward ratio in each trade. However, if you still intend to trade the lower time frame data, make sure you use the multiple time frame analysis. Never rely on the indicators reading to filter out the best trade. Use a different time frame and find out the best trading opportunities.
Trade management skills
To become a successful trader, you need to have strong trade management skills. Losing is just a part of your trading profession. Unless you know the perfect way to manage your risk exposure, a few losing trades will jeopardize your trading career. Always remember, you are here to make money. So never take unnecessary risks to recover the loss. Focus on long term goals and try to reduce the potential risks in every possible way. Learn to use the trailing stop-loss features since it allows the traders to ride the long term trend with zero risk exposure. You can even close trade partially by using the SaxoTraderGo platform (https://www.home.saxo/en-hk/). Make sure you know the details of advanced trading tools since it will significantly boost your trading performance.
Habits of the successful trader
Being a successful trader doesn’t mean you will make money from trading. It means you will be making a consistent profit without any stress. Read the biography of the successful trader and try to follow their footstep. Never think you know all the details about this profession. Develop a strong taste for reading so that you can keep yourself up-to-date with the latest market news. As a currency trader, you should never consider trading as a “get rich quick” project. Consider this profession as your business and trade the market with a decent trading strategy. At times, take some breaks and spend quality time with your family.