Many traders tend to focus on individual price bars or signals when analyzing the market, instead of looking at the bigger picture and understanding the story that the market is telling through its price movements. The key to successful trading lies in being able to read the market’s “emotion” and overall narrative through price action analysis.
In this post, we will lay out some guidelines that will help you build your trading account and that will remove a lot of the “mystery” of what it takes to start growing your trading account.
Price action tells the “story” of the market
Price action reflects the emotional behavior of market participants, and it also has its own unique “personality” and characteristics that vary between different markets. To become a skilled trader, you must learn to read and interpret the story that price action is conveying.
Regularly monitoring the market’s price action is crucial to staying in tune with the market’s narrative and anticipating future events. It’s important to strike a balance between analyzing the market enough to gain insight and not over-analyzing it. By consistently reading the market, even if it’s just a few minutes each day, traders can increase their chances of long-term profitability and master their trading strategies.
Journal to Understand and Follow the Market’s Narrative
Staying up-to-date with the market’s movements is crucial for understanding the story it’s trying to convey and staying in sync with it. One of the most effective ways to “map” the market’s story is through daily journaling, which can help traders gain a comprehensive understanding of the market’s trends, signals, and key levels. This exercise can also enhance market intuition and gut feel, enabling traders to “feel” the market on a daily basis.
To start journaling, traders should record their thoughts and notes on each pair or market they trade, including the daily chart trend direction, key levels, and signals. Journaling can be initiated with a simple pad of paper and a pencil, where traders can jot down the date and make brief notes on the market’s movements each day. By making the process of keeping up with the market’s story a daily habit, traders can get in touch with what’s happening in the market and be better prepared to anticipate potential entry signals.
After recording their notes, traders can stay informed on the market’s movements and key levels, enabling them to be prepared and preemptive. Following the market each day and staying in tune with its narrative through price action analysis is the key to becoming a successful trader. With a consistent routine, journaling and staying in touch with the market’s story can take as little as 10 to 20 minutes per day.
Developing Trading Intuition Through Anticipation
Maintaining a daily market journal or commentary can help traders become more anticipatory in their approach. By documenting recent market movements and speculating on what might happen next, traders can cultivate an inner-dialogue about the market that can enhance their trading intuition and ability to make gut decisions.
For example, after recording key market trends and levels, traders can anticipate a price action signal that aligns with their market bias. This is similar to a sniper picking a strategic location and waiting for their target to come into view. By regularly analyzing the market in this way, traders can gain a deeper understanding of the market’s personality and develop a sense of anticipation that sets them apart from other traders who lack preparation and discipline.
By keeping a daily market diary, traders can immerse themselves in the markets they trade and develop a heightened awareness of the emotional context of price movements. Ultimately, this can help traders get into the “trading zone” and make more informed and profitable trading decisions.
See the “forest for the trees”
Understanding the bigger picture in the market is crucial to successful trading. Focusing too much on one price action signal or bar can be misleading. To avoid this, it is important to consider the overall market context in which the setup is forming. By maintaining a consistent journal or diary of your preferred markets, you can easily recognize the market bias and patiently wait for a signal to appear.
In contrast, many traders overlook the significance of non-entry bars. However, every price bar is essential, particularly on higher timeframes like 4-hour or daily charts. Even bars with long tails, which may not be pin bars, indicate exhaustion and a potential reversal. Therefore, it is crucial to note all bars, including those that are not entry signals.
To trade effectively, one must not rely solely on price action signals but also on the surrounding price action. By considering the broader market trends and context, traders can better anticipate the likely direction of future price movements.
Conclusion
Consistently following the market is essential for traders who want to make money. It’s like reading a book; if you don’t keep up with it regularly, you’ll forget what happened before and where you left off. Not staying up-to-date with the market can lead to unpreparedness and loss of money. Therefore, if you take a break from the market, give yourself time to get back into the groove of things before placing live trades.
Most traders don’t view the market as an ongoing story to stay in tune with. Instead, they make impulsive trades without any logical or supported process behind their decisions. On the other hand, journal your favorite markets will help you anticipate signals and develop your “gut” trading feel, intuition, or discretionary trading sense. Once you get into the habit of recording what you see in the market every day, you’ll become like a sniper waiting patiently for the perfect opportunity to strike.