The price action trading system is based on the Japanese candlestick pattern. The Japanese candlestick pattern allows investors to know about the movement of the market by creating different reliable patterns. Most of the time, inexperienced traders believe in an indicator-based trading approach till they lose a large portion of the investment. Traders must never try to use a complicated approach as it can make things really tough. They have to learn about the price action trading system as it will make them better investors.
In fact, pro traders depend on the price action trading system as it gives them a chance to trade with a high risk-reward ratio. However, this does not refer, they will be going to make a large profit without facing any obstacles in the CFD market.
In this article, we are going to highlight some of the key errors that can destroy your career even after learning the ins and outs of the price action trading strategy.
Analyzing the lower time period
Examining the lower time frame to find a reliable price action signal is a big mistake. Shorter time frames tend to exhibit false spikes and thus the candlestick patterns are not accurate. This might seem like a minor factor but by focusing on the minor details of the field, you can significantly improve your success rate. That’s why smart investors depend on the higher time period like the hourly or the daily chart. They know the chaos associated with the lower time period trading edge is minimized in such a long time frame.
Does this mean that price action signals must never be implemented in the lower time period? Of course not. To trade the lower time frame, we must rely on multiple time frame analysis techniques. These can be mastered easily by using a high-end demo account.
Trading the reversal
Price action trading is not about the reversal method. In fact, this must be plied to trade along with the trend of the market. To be good at analyzing the candlestick pattern, traders need to use a robust trading platform to get correct price feeds. The significance of having a good trading platform is cardinal. That’s why many experienced traders recommend trading with Saxo as you won’t have to worry about the trading platform.
Being a new trader, you should learn the impact of a premium trading environment. Once you have the access to a robust environment, try to take the trades with the major trends only. Actually, price action signals are mostly applied to search the termination point of the retracement. Once the investor learns this technique, he can easily ride the prime trend and make money with managed risk.
Taking too much risk
Taking high risks after knowing about the candlestick pattern is common in trading. Many times, new investors get carried away by seeing a high success rate. But professionals never celebrate. Rather they keep on learning to improve their efficiency. The more you know, the lower the risk you can take at trading. As a result of this strong risk management approach, you can sustain the most complicated position in the field.
Although it is not easy to embrace losses in trading, limiting the risk in the trades can greatly help to endure the losses. Always be prepared to embrace losses from good trades. Once you become used to losing streaks, you will not encounter difficulties in trading.
Breaking the rules
Cracking rules and taking steps to regain losses and become the price steps for rookie traders. Have a look at the professional traders. They never break rules even after losing 10 assets in a row. They are experts at handling risk and they know their risk to reward proportion is going to save their deposit. Without searching for a good risk to reward ratio, they never take any trade in a certain asset.
To act like them, try to prepare a written strategy and follow it properly. Never break the rules of trading as it can destroy your capital. Be a disciplined investor to make sure that you can survive in the most adverse conditions of the market.