Forex market is offering a huge profit-taking opportunity to the retail traders. Anyone can open a trading account and start executing orders with a small investment. By using the leverage, the traders can execute big trades with a very small investment. Getting such easy access to the online trading industry is not going to make you profitable. Instead of relying on expensive EAs or bots, you should learn price action strategy. Let’s explore the five easy steps which help the new traders to master price action strategy.
Learn the basics.
Before you start developing your trading strategy, you should learn about the basics. Without having a clear knowledge of the Forex market, it’s very hard to know your trading style. Some of you might prefer long term trading strategy and some might choose the scalping method. Based on your preference, you have to determine your trading style. Most importantly, you will have the idea of risk exposure. Since the majority of the investors are having trouble to save their capital, you should not start trading with the savings.
Learning about the Japanese candlesticks
After developing the basic knowledge, you have to focus on the Japanese candlestick pattern. The naïve traders often think buying other people’s strategy is the best way to make a profit. But if this was so easy, no one would have lost a dime. Focus on the basic candlestick pattern and try to understand why the pattern is so important. But make sure you are trading with the best introducing broker Forex so that you get premium features in the trading platform. A few second delays in the price feed can significantly change the pattern formations.
Demo trade the market
Demo trading is the best way to develop your skills. The new traders should try to identify the major patterns at the critical support or resistance level. Try to relate the price movement and the formations of the major candlestick patterns at the critical levels. Demo trading should be considered as your learning ground. Once you start to demo trade the market, you can learn lots of new things from your mistakes. Mistakes should be considered as a learning opportunity. Instead of focusing on indicators and other tools, try craft price action based trading strategy. Stop getting frustrated after losing a few trades and focus on the longer-term goals. No one can learn a price action trading strategy within a few days or weeks. Unless you demo trade the market with six months, you can’t develop a balanced price action trading strategy.
Develop your risk management plan
Your risk management plan greatly depends on your trading strategy. Being a user of the Japanese candlestick pattern, you will be setting the stops based on the price action signals. Most of the time can trade with tight stops. So, instead of using the traditional risk management plan, try to develop a new money management technique so that you can execute high-quality trades at the critical levels without having any issues. The risk exposure should be set in such a way so that you don’t have to think about the losing trades.
Trading the real market
You can’t become a successful trader unless you learn to trade in the real market. Being educated in a price action trading strategy, you should focus on the real market. Instead of using the advanced risk management technique, it’s better to get used to the 1% risk exposure. Once you start making consistent profit by using the price action signals, you should slowly increase the risk. But with the increase in risk, you will have more tension in trading. For this reason, some conservative traders often stick to the 1% rule as it keeps them relax. However, if you want to take advantage of the tight stop loss, you should increase the risk slightly.