Top 3 Secrets: Price Action Trading (very IMPORTANT)

so when I first started trading I wish that someone would have shared with me the top three ideas or the top three secrets of price action trading just three simple concepts is what it took to take my trading from consistently losing money to becoming a confident independent consistently profitable trader and in today’s video I want to share those top three ideas with you guys, so, if you’re new here to the trading channel make sure you go ahead and click the subscribe button to be alerted whenever we come out with videos like this along with the Monday market breakdown videos we have each and every Monday talking about trade we’re interested in also click that like button for me to help support the channel, if you don’t mind, I’m going to let the intro and disclaimer a roll and I’ll be right back to share with you guys the top three secrets that I wish someone would have told me at the beginning of my trading career I’ll see you guys on the other side [Music] hey guys, so we just got involved here on the LZ in 5-minute price action day trade and what, I’m going to do while this trade plays out live on the screen is talk to you guys about the top three secrets to price action trading we’ll go through them rather quickly, but these are things I’ve learned throughout my trading career that I would just like to share with you guys here in today’s video, so we’ll go ahead and jump right into it the very first thing we’re going to talk about is risk management this is by far the most important part of your trading and leads directly to being able to stay disciplined to your trading strategies or your trading plan, because discipline comes easiest whenever you’re managing risk correctly, so how can we manage risk well you can do this through position sizing through only trading a certain amount of Lots based on your total account value, but before that even before understanding the correct position sizing for your account value and things of that nature the very first part of risk management is knowing when to go live, so let’s say that you are someone that has just started out trading and I’m actually going to give you guys a little backstory on myself as well to help you understand this concept, but let’s say you just heard about the forex market and you want to make some extra money this is the path that 90% of traders make they want to make extra money they’re all happy about it, then all of a sudden you come over here to youtube or any other investopedia any other free resource they watch ten videos, so there are ten videos deep on YouTube and they think they can really make a substantial income off of forex trading based on what they’ve seen on YouTube videos, so where do they go neck next they open up their live account they put money in the market they are ready to go they’re ready to place actual trades now from here it starts getting very scary and kind of sad at this point from putting their live money in the market they realized very quickly that it’s not, so easy from here it can branch off they can lose minus 20% of their account before they realize this and it’s really dependent on the person they can lose 50% of their account value and some people will even lose 100% of their account value, because of these three steps that new traders often take, so what does this have to do with risk management well correctly implementing risk management means knowing when to go from here to trading in a live market, if you don’t know when to go from the happy trader that watches 10 YouTube videos at the very beginning of his trading career – when do I get into a laugh market, then this could turn out to be you and I don’t want to see anyone lose their entire account value 50% of their account or even 20% of their account I’d much rather share with you guys my experience and the things I did to avoid this situation, so before starting to trade with a live account as where risk management comes into play and just to give you guys a little backstory on why I know this process, so well that we were talking about here the reason is, because this was me in the stock market about seven years ago, so when I was 19 after working numerous jobs through high school and once I graduated I decided that I wanted to find a way to try to make some extra money and the internet seemed to be my only resource considering that all I had was a high school diploma I never went to college, so having that I started searching for ways to make extra money on the Internet what do you think the first thing I came across was stock market very first search result back in for how to make extra money online was stock market, so who do you think I turned into this cat up here I turned into the guy that was super happy and had just found a way to make extra money online I watched no joke probably 10 to 15 YouTube videos about the stock market and I thought I was an expert I already had strategies planned out I was already doing the math that, if I was to put a certain amount of money into a stock and it rose a certain percentage how much would I make on that stock this is the kind of math we all do when we first start trading, so after doing that math and watching those 15 videos on YouTube I decided that it was a no-brainer right it’s time to open a live account it’s time to start really doing this, so I took my life savings and I put it into a Scottrade account this was one of the worst decisions financially that I’ve ever made and you have to understand growing up and before this point I never had a income of above $30,000 a year I was well below average when it came to income, so it took me a vast amount of time to actually save up the amount of money I had saved for now let’s just call it ten thousand dollars, so let’s say I had ten thousand dollars saved up and I put every bit of it into the livestock market as I said took an extreme amount of budgeting in order to get to that point, because of the fact that I had bills I was living on my own I never had a job making even average income, so needless to say it was a lot of hard work budgeting and actually suffering to save up that kind of money I and when I say suffering I mean I wasn’t going out and doing things like everyone else my age was doing, because I was really focused on trying to budget and save money, so I jumped in the market for example purposes let’s say I had ten thousand dollars when I jumped in and as soon as I jumped in with real money you know the strategies I learned here only YouTube videos and the free stuff that I was listening to and watching it’s like all of it disappeared as soon as I put live money into a Scottrade account I just wanted to be involved in something, so I ended up placing a few trades in the first day I think I lost $400 after day one, so this is one day was negative 400 bucks it’s a 4% loss only account value in a day now I’d read articles and watched youtube videos that said that losing a little bit of money every now and, then was okay in the stock market, so I didn’t freak out too much about this, but to keep an extremely long story a little shorter the short version of this story is around 2 months later I had lost 60% of my total account value of my life savings that took forever in my opinion to save up it took my entire life to save up this kind of money and I lost and I lost 60% of it in 60 days and this was an awful feeling, but I’m glad it happened, because it actually gave me the opportunity to understand risk management extremely early in my trading career after this happened to me I figured out that I obviously was doing something wrong and it couldn’t just be the fact that I was trading the wrong strategies it had to be something else and what it ended up being is risk management I was incapable of staying disciplined to a strategy, because every time I put money in the market I was using too much I was risking too much not to mention the fact that I had no type of trading plan, so there was a lot of things that went wrong and the way this ties into backing the risk management over here is the fact that I was nowhere near ready to trade with a lot of money in a live market and, because of that I lost 60% of my total account value now whether that sounds familiar to you or not you may be coming to this video as someone who’s lost money in the forex market before or someone who’s brand-new, if you’re brand-new learn from my mistakes, so how do we fix this well my way of fixing this was understanding in the steps that it took to get from the happy guy that just learned about trading they just watched 10 to 15 YouTube videos to live markets there’s a lot of stuff in between there that needs to happen, so let’s discuss a little bit about that, so we had to redraw this see a little more room in here, but but here’s the happy guy that just learned about trading he’s watched 10 YouTube videos let’s say this is me and I’ve already went through the process of losing money, so I’ve already lost money I’ve already seen my 10 to 15 youtube videos and I actually ended up taking a course that taught a little bit about discipline and risk management, so after that I understood what I was doing wrong well the way I fixed what I was doing wrong is I took a step back and at this time I was still trading in the stock market and I learned how to test strategies in historical data that was my first step according to this course that I took it was going through the market testing historical data for patterns that happened over and over and after that coming up with a winning percentage how many times did you lose versus how many times did you win and from that, then you can come up with your risk management plan this was a milestone in my own personal training once I realized this part of it once I realized that it came down to a numbers game of finding a strategy that won more than it lost per trade or won more times than it lost in general I was able to separate logic and emotion and actually began to get better as a trader, so testing was the first step once I had a strategy and the testing results in a spreadsheet, then I was able to actually create a risk management plan we’re going to abbreviate here, but I was able to create a risk management plan based on the testing results, so I look at the results of my testing and say the most losers I’ve had in a row or six or seven with that being the case or the biggest drawdown I had whatever you want to call it with that being the case how much can I risk per trade percentage-wise based on my total account value in order to only lose what I’m comfortable losing at the time I was only comfortable losing 10 percent of my total account value in a drawdown, so, if I lost seven trades in a row and only wanted to lose 10% of that total account value it came down to simple math and of course past trading results are not always indicative of the future there was a possibility that the same strategy could have lost eight or nine in a row, but this is what I had to go on now I had a system in place and probabilities in place to help me create this risk management plan, so after creating the risk management plan it still was not time to go into a live account now I wanted to make sure that the strategies I had tested now I want to be able to actually make sure that I can implement those strategies in the market and I can trade those strategies how do we do that well we do that through demo trading and guys this is a very brief explanation of how to do all this, if you want a more in-depth video on risk management and this type of topic, then just leave me a comment in the description letting me know, but after creating the risk management plan let’s went straight into a demo account to see, if I could implement the strategies I learned and tested they were swing trading strategies in the stock market and I was actually able to do it I had a full time job, but I was still able to take advantage of it on my lunch break with a laptop I was able to go out and actually do some analysis place trades based on that strategy that was like I said a swing trading strategy and I stayed in a demo account this period of time here I stayed in a demo account for about five months after that, so I really after losing 60 percent of my life savings I really wanted to prove to myself that I was capable of making a profit in the financial market before I actually went live, so doing this demo account for five months really helped me to gain confidence in my own personal trading which is essential for discipline which is another huge part of trading just as big as risk management which the two go together in a way, but discipline and risk management are going to be the two biggest parts of your trading and another thing I would stress is when it comes to risk management the way I like to look at it is I’m not going to trust myself with money unless I’m a person I would trust with my money, so what would you be looking for, if you were looking for a financial adviser to take control of your funds to take control of your life savings and tell you what to do with it what would you need from him past trading results would you want to see that he’s been able to be profitable before what would you need and until you’re the person that you would trust with your money why are you trusting yourself with your money does that I hope that makes sense like why would you trust yourself with your own money, if you’re not someone you would trust with your money, if you were a different person I know that’s kind of confusing probably, but in my mind it makes sense anyway, but that’s the conclusion I came to, so I wanted to make sure throughout these five months that I was a person I trusted with my money in this demo account and, then I still started an account with a small amount of money I call this 2 micro account, so, then I started a micro account stayed in a micro account for a couple of months and, then finally started trading live with the full amount of funds that I had and also another thing to remember is do not and, I’m going to go ahead and write this out before I say it I’m Dyslexic this in could be backwards I’m not really sure sorry about that do not risk your life savings like me another crucial part of risk management is risking what’s called risk capital and this is a number that can only be defined by you I’m not a financial planner and I am in no way telling you how to trade or manage your own money I can’t legally do that, but trading with risk capital is common sense do not trade with money it’s going to take you to pay the power bill next month do not trade with money you have saved up for a rainy day in case your car breaks down trade with what’s called risk capital the amount of money that, if you lost it would not affect your financial situation it within a great deal of course no one likes losing money, but don’t trade with an amount of money to the point that, if you lost it all you’d be living on the streets this is a mistake that I made personally I started trading with my entire life savings and that also caused a big problem when it comes to discipline, so there’s our talk on risk management I know that was a little drawn-out and long, but it was still a pretty brief talk on this subject as I said, if you want to hear more on this subject leave me a comment below and I’ll do a complete video or nothing, but risk management otherwise we’re going to move on to the second secret of price action trade the second secret of price action trading is going to be structure and trend analysis understanding these two things will make your life, so much easier when it comes to price action trading having rules that define when a markets in trend and rules that define a major and minor level of structure these can be rules you create it’s not a set in stone thing there’s not one rule that every trader across the world uses to define major structure there’s not one rule that every trader in the world uses to define trend that’s why you’ll see some people saying a markets and an uptrend some people saying it’s in consolidation or a downtrend, because people use different rules in order to define it the important part is that you have rules of your own, so that you can stay disciplined to those rules and see, if it gives you these are these rules you have for trend and structure give you an edge over the market you can find that out by testing historical data like we talked about, so just to briefly go over trend and structure most of you probably already know a little bit about trend and structure unless you’re brand new and, if you are trend is going to be a market that starts makes 8hi a higher low a higher high a higher low a higher high and a higher low and a higher high this is an example of an uptrend a market that’s consistently making higher lows and higher highs and the reason I say people read trend differently is, because this is not how an uptrend always looks is it sometimes we’ll have a trend that looks like this and now what is this still an uptrend or is it a downtrend well that depends on your rules, if you have rules that say the lowest major swing low which is here and the highest major swing high are the only two I look at, then yes this would be an uptrend we have higher highs and higher lows consistent amount but, if you trade based on poor defined structure and trend based on minor levels of structure like these in here, then you would say well this market went from an uptrend to a downtrend well this market here’s a little level structure here this market went from an uptrend to a downtrend, so now hopefully you can see how just, because someone has different rules does not mean that one person’s right, but one person’s wrong it just means they have different rules that they’ve defined and tested through the market and that their rules give them an edge over the market based on the strategies they use and it’s complicated as that may have been that is the easiest way I can explain trend and structure, so that was a brief explanation of let’s talk a little bit about structure as well, so with structure this is just my opinion these are the this is the way I personally look at structure I look for levels in the market that have been touched multiple times in the past, because this gives me an indication that that level could be used as support or resistance yet again, so the way we define that is let’s say we have a market that looks like this our major level of structure at this point would be right here and the reason is, because it’s been touched as resistance and as support and the market has respected that level both times once as resistance and once as support, so, if the market gets back up to that level, then, I’m going to count that as a major level of structure, so that’s how I personally define major levels of structure as I said you don’t have to use the rules I’ve stated here today you can use your own rules you can test your own rules throughout historical data and that’s to me one of the greatest parts of trading is that everyone can have a different opinion and everyone can still not be right or wrong it’s a very interesting concept, so as I said the second secret the price action trading is definitely understanding structure and trend, because these are going to be the center points to the strategies that you use and finding the patterns these are going to be the conditions for the patterns that you try to find and, then last, but not least it’s definitely going to be patterns, so patterns can be multiple things we can be talking about things as simple as candlestick patterns such as a shooting star or a hammer candle or we can be talking about simple patterns such as a flag triangle or pin it and we can even be talking about advanced patterns such as the bat dart Li butterfly or cipher now the reason patterns are, so important is, because once you combine the structure and trend analysis that you learn the patterns are going to act as your entry reason, so the structure and trend are going to act as conditions that you use you’re going to look at the market and say it’s in an uptrend based on the rules I’ve created for an uptrend it’s in a downtrend based on the rules I’ve created for a downtrend now with the rules of the up in the downtrend or the rules of consolidation whichever particular market condition you choose to trade in now you start to look for patterns in that condition this is going to amplify and make your strategies a little more accurate actually creating those conditions of I need to see a market in a downtrend before I look for a flag pattern I need to see a market in an uptrend after a pullback before I look for a hammer I didn’t see a market overbought before I look for a hammer candle these are all conditions you can use and I didn’t put indicators in this video, because these are top three secrets to price action trading not trading in general, so understanding candlestick patterns simple patterns and advanced patterns is the third secret to price action trading and I know that advanced patterns you have to use Fibonacci retracements in order to find, but it’s still a price action pattern, so these are the top three secrets to price action trading in my opinion this was a pretty simple breakdown of these three price action trading secrets, if you’d like some more advanced training on these three topics on techniques to help with risk management and discipline along with different techniques for structure analysis and defining trend and also the patterns and strategies that we use in our trading here at the trading channel, then you can learn about all those things in the EAP training program for those of you interested in that I’ve left a link in the description for 20% off the quarterly option of the EAP training program, if you’d like to learn more about the program just click that link and it’ll take you to a video this explains everything included in the EAP, if you’re brand new here to the training Channel and you enjoyed this content, then make sure that you go ahead and click that like button for me go ahead and click that subscribe button, so that you stay alerted whenever come out with new educational content like this along with our weekly market prediction every single Monday share this video and also leave a comment in the comment section below, if you have a recommendation for our next video I wish you guys the best of luck in your future trades I hope this was helpful and I’ll talk to you the next video.

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