Stocks

Keep Your Price Charts Clean

BrandonWendell
Brandon Wendell
Instructor, CMT

You may have heard from various sources that very few people are truly successful in trading.  While this may be true, do you know one of the main reasons why traders fail to make profits?  It is often because they over-complicate their trading.  There is a false belief that because so few people are able to make profits in the markets then it must be a complicated process.  Since it is complicated, you must use many tools to predict price movement.

This is far from the truth.  The over-complication of the trading process is what leads to poor decisions, frustration and failure.  The truth is, the simpler you keep your trading processes and routines, the more likely you are to become successful with it.  Please do not confuse simple with easy.  You will need to have the proper knowledge on how to read price and anticipate actions taken by the market participants.  This will become easier with practice and mentorship with highly trained instructors such as the ones at Online Trading Academy.

Looking at a typical novice trader’s charts, you are likely to see many technical indicators.  These indicators are touted in nearly every trading book ever written.  They are hailed as a better way to read price and have trading signals shown to you in a timely manner.  There is a major flaw with this…they are all based on past prices and are delayed!  You would always get a buy or sell signal after the optimal opportunity.

Don't over complicate your price chart.

There is another problem with the traditional use of technical indicators.  If they are widely promoted and used, then the professional, institutional traders know amateurs are using them and therefore know where you are likely to enter or exit the markets and worse yet, where you are likely to have your stops placed.  Have you ever felt like there is a camera on your trading computer telling everyone where your trades are?Tweet: Have you ever felt like there is a camera on your trading computer telling everyone where your trades are? http://ctt.ec/i7_aV+  There isn’t, but if you trade in a novice manner, your actions become predictable and vulnerable.

So how should one trade?  Just like any other endeavor, you want to find out who is successful in it and mimic them.  Traders on the floor and electronic institutional traders are concerned about one thing, price.  You need to focus on price and see where the professionals are buying and selling versus the novices.  Believe it or not, there are patterns that both groups leave in price charts.  Buying and selling with the professionals and against the novices is the best way to ensure trading success.

Professional traders have a window into the novice trader's trade decisions.

Some of you who have followed my previous articles or have been in my trading classes may be tempted to call me a hypocrite because I do indeed use some technical indicators in my personal trading.  However, there are two things you must realize about their use.

First, I do not use them as a decision making tool.  I only use these indicators as a decision support tool.  In other words, my decision to buy or sell is made based on price action.  The indicator is simply used to help me filter out bad trades by indicating whether the level at which I am to buy or sell is more or less likely to work.

Free Trading WorkshopSecondly, I do not use the indicators in the same method as indicated in most trading books.  As mentioned previously, using the indicators the same way the masses do would lead to the same poor trading results.  I want to succeed just as you do, so I use the indicators in a different way that allows me to properly read price and support trading decisions.

In conclusion, keep your price charts clean and focus on reading price in order to increase your chances for trading success.  To learn how to do this, contact your local Online Trading Academy office and enroll in a program that will expose you to the proper way to read price.

Brandon Wendell – bwendell@tradingacademy.com

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.