Forex Markets are Contrarian; Trade with Price Action
Forex markets are naturally contrarian. This means that they are regressive in nature and have a natural tendency to pull back to the mean price. This is a big reason why so many beginning traders lose all their trading account money and give up. The fact is that most of the time when it feels safe to enter the market it is usually not. When a move in the market is greatly extended in one direction and looks like it will keep going this is usually the precise time it is about to fall back and correct itself. This extension also happens to be the time most beginning forex traders tend to enter the market. It often takes multiple years of losing money before traders learn that they have to wait patiently for the market to contract before entering, and many traders give up before they finally realize this truth.
Generally speaking, indicator based trading systems simply do not work in strongly trending markets. They will give you a sell signal long after a market has started coming back down and the correction is almost over. Sometimes they give you a sell signal at the very time the correction is over and you should be looking to get long again, or vice versa. If you know how to tell based off pure price action when a market is exhausted or when it is ready to break out then you have the keys to building a highly profitable and consistent trading method.
Price action analysis is the best method for learning to profit from the forex market. There are usually tell-tale signs a market is ready to correct or the trend is ready to resume that are readily apparent through the study of price action. All you really need to know are a few simple price patterns and basic chart support, resistance, and trend lines and you have enough information to put together a profitable trading method. Some traders try to program indicators and even develop new ones because they mistakenly believe if they put more math and study into their trading technique they will be further ahead of other traders. This is just false. While you do need some sort of education in technical analysis and price action, it does not need to be complicated or involve programing expert advisors and other fancy non-sense.
Once you develop a keen eye for price action setups you will be able to tell if it’s unsafe to enter a trend or that the trend is ready to resume. It’s all right there on the chart, you just need to be shown the way by someone who has walked in your shoes and made it down the path to trading success. Price action can be a great aid to developing your market discipline and shaping a relevant market perspective. If you are just starting out and this is one of the first trading articles you have read than I strongly urge you to check out an education in forex price action. Go to YouTube and look up “forex price action” or “forex price action strategies” and see if you like what you find; there are many good free sources of price action information on YouTube. Price action analysis has been the key to my success in the markets and I hope it will be the key to yours.
