The price action trading method is basically the process by which the trades are executed with the help of the Japanese candlestick. This method has become extensively popular among new UK traders due to its extreme level of reliability. But after using the trading system for months, the traders start to lose money since they don’t know the proper way to identify the weakness in the system. No matter which method you use to find a good trade, it needs to go through a process of trial and error. Due to the different personalities of the traders, the same strategy can result in a big loss.
So, how can we overcome such a big barrier and make a decent income with the help of a price action strategy? Well, you have to know the proper way to find the weakness in your strategy. Read this article carefully since we will highlight some key factors that can help you to identify the mistakes in your trading strategy.
Demo test your strategy
You should always take blessings of the demo account to become a successful trader. Unless you do so, it will be really tough to make change your life with the investment business. As soon as you start with the demo account, you will get the unique opportunity to find the mistakes. Since no real money is involved in the demo account, you can test different types of approaches to deal with the support and resistance level. Regardless of your trading strategy, you should be concerned about the daily and weekly time frames. Though the 1 hour and 30-minute time frames are often used by naïve traders, it requires precision and a strong mentality.
Create trading books
You should create a trading book so that you can keep track of the record. The pro-UK traders often call it the trading journal. But this journal will be of no use unless you have a robust platform. Check here to get an idea of the professional trading tools available in the SaxoTraderPro platform. Once you know, you are trading environment is perfectly tuned, it’s time to place the trade and track the results. After you have executed 20 trades, you should take a short break and assess the results. Based on your initial results, you have to look for the potential scope where you can bring variations to your trading method. Once you are done with that, you will know the key reason why some of the trades went wrong even after using the reliable patterns.
As a professional price action trader, you should be more concerned about continuation patterns. The continuation pattern is specially designed to reduce loss in trading. Instead of looking for the reversal candlesticks, you should be looking for the key retracement zone. At the key retracement zone, wait for the formation of the new candlestick, so that you can place a new order with a great level of confidence. However, you can still trade the continuation pattern with a high level of accuracy. For that, you must have the ability to compare three different time frames. The comparison of more than one-time frame is known as multiple time frame analysis and it can help you to filter out the false signals.
Dealing with the high-risk trade
The pro price action traders often trade with high risk. Similarly, naïve traders start utilizing the market leverage without knowing the consequences. Eventually, they lose a significant portion of their investment. If you want to change your life, you have to limit your risk in every possible way. Unless you consider yourself as a Forex guru, you should not be taking more than a 3% risk in any circumstance. Based on this simple principle, you can slowly build your career without taking high risks to earn money.