Reblog: 8 Price Action Secrets Every Trader Should Know About


Price action is among the most popular trading concepts. A trader who knows how to use price action the right way can often improve his performance and his way of looking at charts significantly. However, there are still a lot of misunderstandings and half-truths circulating that confuse traders and set them up for failure. In this article, we explore the 8 most important price action secrets and share the best price action tips.

#1 Support and resistance zones are better than levels

Support and resistance is probably the most popular price action concept, but only very few traders can actually make money with it. The reason is often very simple, although it’s not as obvious at first glance.

Most traders just use single, horizontal levels when it comes to trading support and resistance which look great in hindsight but fail during live trading. The reason is that singles lines are no effective way of looking at price movements. Creating support and resistance zones is much more effective when it comes to understanding price.

The screenshot below shows that the trader who just uses a single line either misses trading opportunities when the price does not reach his lines. Or he gets thrown out during volatility spikes; the trader who uses zones instead can filter out the noise that exists in the zones.

I hope that this concept doesn’t have to stay one of the price action secrets much longer and more traders will start using this technique.

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Reblog: 5 Ways To Identify The Direction Of The Trend


Trading with the trend is trading with the flow. When the prevailing trend is up, why would you want to look for short entries when buying might result in much smoother trades? Many amateur traders, even when facing a long lasting trend that has been going on for months, can’t stop trying to predict reversals, whereas they could have made so much more money by simply joining the trend.

But even if you are not a trend-following trader, you can combine the concept of trading with the higher timeframe trend with your regular trading approach: you start on the Daily timeframe and see if the trend its up, down or sideways and you use that information on your lower, execution timeframe to time your trades (read here: how to perform a multi-timeframe analysis). To be able to correctly read price action, trends and trend direction, we will now introduce the most effective ways to analyze a chart.

Intro: The different market phases

Before we start going over how to identify the trend, we should be first clear what we are looking for. Markets can do one of three things: go up, go down, or move sideways.

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The picture above shows you the three possible scenarios and how markets keep alternating between the phases. But knowing what has happened after the fact is always the easy part. The hard part is finding out what is currently happening when markets are moving in real time and the space on the right is empty – that’s where this article comes in. To be clear, the article is not meant to show you how to identify trading entries, but to understand price and trends in a more efficient way.

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