The term price action trading has become more popular than ever, but most traders still fail to recognize the potential of this three letter phrase when it comes to their trading. It does not matter if you trade forex, futures, stocks, commodities or any other financial instrument. If your market of choice is liquid and it can be charted, then trading that market with price action is the ideal and most logical way to approach it.
Price action trading is not a magic bullet that will instantly turn a consistently losing trader into a winning trader. However, if one truly learns to read a chart using price action, they will very likely change their trading results for the better. Price action trading is really nothing more than entering and exiting your trades using only the price bars as they are printed to a chart. Believe it or not, most large and successful fund managers are not entering and exiting the market based on some fathom indicator. For the most part, the only traders using indicators are the ones that believe there is some special indicator that will actually tell them something that is useful when they enter a trade. The most sought after professional traders are entering trades based solely on price and the location of that price, this I can assure you.
One thing is certain: Indicators are so popular with retail traders that there is a complete industry that does nothing but create new ones in order to meet the demand. I am sure that you have heard the old saying that 90% of all traders lose money, and that only 10% make money trading the markets. I honestly would not argue with anyone that told me that the number of losing traders was even higher than 90%, because it likely is higher. One thing that most of these losing traders are doing is making trade decisions based on what some special or new indicator is telling them.
Do not take that statement the wrong way though. This is not to say that there are not some indicators out there that can add value to your trading, because there probably are some. I also would not knock any of the people that create and sell these products either, because the demand is there, and wherever there is demand, there will be someone ready to fill it. After all, thats capitalism, and I am all about capitalism and the opportunities it brings us in here in the U.S. Just know and understand that trading with an indicator is much like having to walk with a crutch. Sure, if you have a broken or hurt leg, a crutch is very handy, so it does serve a purpose. However, if nothing were wrong with your legs, would you really want to walk around on crutches all the time? Of course not, because those crutches would actually slow you down and hinder you if your legs were healthy.
This is exactly how indicators work with trading. If you really know how to read a chart, and you know and understand price action movements, then you actually have an advantage over 90% of all the retail traders out there that do not really understand what prices are doing and where they are likely to go next. The movement of prices is something that you can learn to read and interpret over time when someone can show you how to do it properly.
Jesse Livermore was one of the best tape readers in all of history, and all that he really did was understand price action movements, and he used that knowledge to his advantage. Once you understand prices and you can read a chart, you will want to throw away those crutches or indicators that are doing nothing more than holding you back and slowing you down in your trading.
