Many new or old traders have misconceptions about Price Action Trading. They make these traders further and further away from the destination of success. At worst, some even lose all motivation and money in their accounts. In this article, I will write about the misconceptions about Price Action trading that I have learned during my 7 years of trading. To get rid of those distorted thoughts, let’s read this article to see how beautiful Price Action is.
- 1 Misconception 1 – Price Action is the only way to success in trading
- 2 Misconception 2 – Price Action is hard to learn
- 3 Misconception 3 – Price Action is all it takes to trade
- 4 Misconception 4 – Price Action is the only early indicator
- 5 Misconception 5 – Price Action is the method with the highest probability of winning
- 6 Misconception 6 – Price Action is just about boring candlestick patterns
Misconception 1 – Price Action is the only way to success in trading
Many traders believe that Price Action is the only way to success in trading. But they don’t know that many other directions will also reach the destination normally. Actually, Price Action is just one of the high winning rate trading methods. And like many other methods, it also sometimes goes wrong and causes losses.
There are many very good trading methods that millions of traders around the world are using and making profits every day. They include fundamental analysis, indicators, Ichimoku, classic price patterns, etc. Price Action trading is just one of them. In particular, no one has dared to claim that it is more effective than other methods.
The issue here is which method suits your personality and trading style. If you can’t find it, just go find it and then test it with a demo account. Trade with whichever method you are most comfortable with. Don’t force yourself to learn Price Action when it doesn’t please you.
Misconception 2 – Price Action is hard to learn
On the contrary, Price Action and its concepts are extremely easy to learn. If you’ve read my Price Action series from the first post to this one, you already know the basics enough for analysis.
The difficulty here is the Price Action application to make a profit.
Price Action is a very simple tool that only uses candles to analyze and predict the next move. But the simpler the tool, the more skilled the user is required. There will be no indicators to guide you on what to do next. You have to look at the price line yourself and then analyze the buying force, selling force, swing point, etc, to create a future trading scenario that is most beneficial to you.
Once you know Price Action, you need to train yourself to use it. Price Action is very easy to learn but difficult to make a profit from it if the user is not qualified enough.
Misconception 3 – Price Action is all it takes to trade
Price Action is just one way for you to understand the market through charming candles. To make money from the market regularly, you need to know more than that.
You need to understand yourself, that is, to know about the psychology of crowd trading.
You need to understand the risk. That is to know how to manage capital, and how to increase the account gradually over time.
Finally, you have to know how to put everything together. Use Price Action to analyze the market and enter orders. Use capital management to enter orders with reasonable volume and use trading psychology to manage orders from entry to exit.
Then after each trade, you need to write it down in your diary to learn for yourself. Each trade is a lesson so don’t let it pass without leaving anything useful.
Misconception 4 – Price Action is the only early indicator
Price Action is literally called a PRESENT and PAST indicator. It is pretty accurate but it never leads the market.
The market is made up of prices. Prices are the market. How does the market lead itself?
Prices don’t lead the market. But they give us the closest update to what’s happening in the market. We learn Price Action, that is, learn about price behavior.
Misconception 5 – Price Action is the method with the highest probability of winning
This is only partially correct. High probability or not depends on how you use it to trade.
Price Action can have a very high probability if you enter a trade following the trend after a pullback. That probability will be reduced if you use a reversal trading strategy. Price Action has the lowest probability when an order is entered randomly according to the setup, regardless of other factors.
Misconception 6 – Price Action is just about boring candlestick patterns
Candlestick patterns are very effective. True Price Action setups are candlestick patterns. But there’s more than that.
Price Action is learning how to recognize when a candlestick pattern works and when it doesn’t. This requires some experience and familiarity with Price Action trading.
Price Action is beautiful because it still has its downsides and is not perfect. Price Action is beautiful because it depends largely on the user.
Through this article, I hope you have a better view of Price Action. Don’t see it as the holy grail on the road to profit. Any strategy has its advantages. It is important that you understand the strategy you use, and know its strengths to exploit and its weaknesses to minimize risk.
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