The Essential Guide to Price Action Trading

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[Why support and resistance are not lines on your chart]

Let me share with you a story…

In my early days of trading, I used to think my support and resistance lines are the best and the market will respect it to the pip.

But it didn’t take me long to realize my support and resistance levels keep getting breached, and I thought it was a breakout.

So I traded the breakout.

The next thing I know, the price quickly made a swift reversal in the opposite direction and I got stopped out.

So, I looked back at my charts and asked myself:

“What the hell went wrong?”

Well, it seems the levels I drew did hold up, albeit not to the exact pip.

And that’s when I had an “Aha!” moment…

I realized support and resistance are not lines, instead, they are areas on my chart. Here’s why…

There are usually two groups of traders in the market:

- FOMO traders
- Cheapo traders

I’ll explain…

Traders with the fear of missing out (FOMO) would enter their trades the moment price comes close to support.

And if there’s enough buying pressure, the market would reverse at that location.

On the other hand, some traders want to get the best possible price (cheapo traders), so they place orders at the lows of support. And if enough traders do it, the market will reverse near the lows of support.

But here’s the thing:

You’ve no idea which group of traders will be in control. Whether it’s FOMO or cheapo traders.

Thus, support and resistance are areas on your chart, not lines.

Candlestick Charts Explained

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Trading Success = Edge + Risk Management + Discipline

MACD Indicator Explained

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[Support could become resistance, why?]

There are two reasons for this…

Reason #1: Losing traders hoping to get out at breakeven

Support is an area where potential buying pressure could step in and push the price higher.

However, support doesn’t always hold.

When it breaks, those traders who are long will be sitting in the red. The smart traders will cut their losses and move on. But, stubborn traders will hold onto to their losses and hope the price will reverse back to their entry price — so they can get out at breakeven.

So if you think about it, this group of stubborn traders will create selling pressure at their entry price as they exit their positions, and if there’s enough of such traders, support will become resistance.

But that’s not all because…

Reason #2: Textbook setup

Traders familiar with classical technical analysis will look to sell at the previous area of support as that’s what most textbooks teach.

And if you get enough traders “following” the textbook setup, it puts selling pressure on the previous area of support which could now become resistance.

Discover Professional Price Action Trading Strategies To Profit In Bull And Bear Markets

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Trading will not make you rich.

At least not next week, month, or year.

But if you persevere, protect your downside, and compound your returns—you will make it.

[STARTS IN 12 HOURS]

Do you trade the US stock market?

Then join me at my free upcoming event called, Stock Trading Secrets.

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1. How to beat the markets and earn an extra 10%, 20%, or even 40% a year—without analyzing candlestick charts, reading financial reports, or studying technical analysis

2. How to grow your account to 7-figures and beyond even if you have a small starting capital

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Trend Reversal Trading Strategy Guide

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A detailed guide on how to trade chart patterns like a pro even if you have no trading experience

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One trade won't change your life. Thousands of trades with an edge and risk management will.

4 Techniques To Profit From a Stock Market Correction

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[Why you always get stop hunted and how to avoid it]

Imagine…

You manage a hedge fund and want to buy 1 million shares of ABC stock. You know support is at $100 and ABC is currently trading at $110.

Now if you were to buy ABC stock right now, you’ll likely push the price higher and get filled at an average price of $115 — that’s $5 higher than the current price.

So what do you do?

Since you know $100 is an area of support, chances are, there will be a cluster of stop loss underneath it (from traders who are long ABC stock).

So, if you could push the price lower to trigger these stops, there would be a flood of sell orders hitting the market (as buyers will exit their losing positions).

With the amount of selling pressure coming in, you could buy your 1 million shares of ABC stock from these traders which gives you a better average price.

In other words, if an institution wants to long the markets with minimal slippage, they tend to place a sell order to trigger nearby stop losses. This allows them to buy from traders cutting their losses, which offers them a more favourable entry price.

Go look at your charts and you’ll often see the market taking out the lows of support, only to trade higher subsequently.

Now you’re probably wondering:

“So how do I avoid it?”

Simple.

Set your stop loss a distance away from support to give it some buffer so your stop loss doesn’t get eaten too easily.

Here’s how…
- Identify the lows of support
- Find the current Average True Range (ATR) value and subtract 1 ATR from the lows of support

The idea is to define the current market’s volatility and then subtract it from the lows of support.

This way, you are giving your stop loss a buffer that’s based on the volatility of the markets (and not just some random number).

Pro Tip:

If you want a tighter stop loss, you can reduce your ATR multiple, like having 0.5 ATR instead of 1.

A monster guide to candlestick patterns to teach you everything you need to know about candlestick patterns without memorizing a single one

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Your trading entry is not everything!

Don’t forget:

Risk management

Trade management

Position sizing

Mental capital

Context

Exits

These are 23 lessons I’ve learned from some of the greatest traders…

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[The ONE thing you should never do in trading]

Trading is a mental game.

If you want to excel in this endeavour, your mindset must be at peak performance.

But if you borrow money to trade, you erode whatever edge that you might have.

Here’s why…

Trading with borrowed money = Money you can’t afford to lose.

And when you trade with money you can’t afford to lose, you make poor trading decisions because you have the “I can’t afford to lose” mentality.

So, what do you do?

- You shift your stop loss because you don’t want to take a loss
- You take tiny profits because you’re afraid of watching them turn to losers
- You average into your losers hoping to catch the bounce and recover your losses

Eventually, your poor decisions catch up with you and you lose everything (including the money you borrowed).

Now you’re worst off than before because not only are you broke — you’re also in debt.

Do you want this to happen to you?

Then, don’t borrow money to trade.

Repeat after me…

I’ll never borrow money to trade!

This is a 31-page trading booklet that contains a specific trading system that has generated 1451.74% since 2000—and has 18 winning years out of the last 20.

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How to use Moving Average to better time your entries, set proper stops, and ride massive trends

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