Hi everyone, scanning through the forum I saw many fancy trading systems who are teaching newcomers to focus on the colored lines of the indicators, some other trading system says you should watch carefully to the tick volume while a candle is developing and… enough.
it’s pretty simple. Whenever there is balance in the market, buyers and sellers are putting in the same amount of orders. Still, bulls or bears are trying to win the battle.
So price will probably break above or below the accumulation and when it breaks it does it in a strong manner.
Can you see this? See how price create this aggregate on the right? How price fell after that?
That’s what I mainly trade, the target for the trade is the next cluster below!
In example 1 you bought after a congestion zone in a downtrend. In example 2 you shorted after a higher high in an uptrend. In 3 you sold after an exceptionally string bullish candle. In 4 you bought after congestion in an uptrend and 5 shows a down-leg after congestion in a downtrend.
So, why buy and not short, and why short and not buy?
You cannot trade the market using a fixed approach. Do you know about model deterioration?
If you are using a mechanical trading system with no flexibility, your strategy will perform worse over time (3-6 months).
If you adjust your strategy to the market phase and condition you can maintain or increase your winning percentage.
By definition price action trading is exactly that, discretionary and subjective. No two PA traders see or trade the same way. Indeed, one might go long and one might go short looking at the same chart. And there would be no reason why either shouldn’t profit.
Cheers for this. It seems a conclusion that you are making the system work, rather than the system works for you, or for me and everyone else who tried it, and that’s fine - profit justifies everything. The aim of the game is to make profit not beautifully crafted but useless strategies.
But whilst taking that you trade on a discretionary basis, surely you apply some objective rules as to why you would buy here in an uptrend and sell there in an uptrend?
On top of which, why would a mechanical system’s performance ever deteriorate? (I have heard this before but seen no real supporting evidence)
A mechanical system is built specifically to take advantage of a market imbalance. A market imbalance manifests itself during a specific market phase.
If the market phase ends, your mechanical system needs to be modified accordingly.
That’s why most forex robots are useless after 3 or 6 months!
Usually, when looking at EURUSD, i pair the DXY. If I want to open a trade on either of two instruments, I first watch if they are correlated in their movements which is usually the case.
This acts as a “confirmation” that if the correlation is strong i can trade both of the instrument and double my profit!
Exactly! You can use indicators just to confirm your thought and the trend of the market. Many times you can also use them for recognizing the best buy or sell signal.
