What to know about trading forex using price action
If you want to get a true understand of the forex markets, you’re not going to be able to accomplish that with the use of forex lagging indicators.
Indicators such as MACD may look great on the charts, but you’d be hard pressed to find anybody who can use it to get a deeper understanding of the markets.
I?m sure many of us understand the rules on how to trade the MACD, but does anybody know what the indicator means to the overall scheme of the markets? Probably not.
While using indicators such as these may seem like a great shortcut for learning the forex market, the real truth is you’re just using it as a translator of the market. The indicator translates what it sees to you and shows what it sees through different colors and lines. This may seem like a great idea, but it’s really not.
You’re the one that has to be the translator, though. The market shouldn’t be interpreted by some indicator. For example, if you moved to a foreign country for a year, aren’t you going to at least try to learn the language. Sure, you can probably find people to translate for you, but do you really think you’re going to enjoy living there if you do that? Well, it’s the same exact principle in forex, except the language is price action.
If you want to learn this language, the first thing you need to do is go to the charting system you use and get rid of every single indicator you have on them. Then pick your favorite currency and watch all the price movement for the day.
Pessimists probably think that doing this will not lead to anything, but if you take the time to do this , you’ll start to notice that price patterns can be repeated and forecasted. This is the real holy grail.
If you don’t really think its possible to do this, then research the name Jesse Livermore. Livermore became rich in the early 20th century by just trading on the market floor. All he used was the price action from the other traders on the floor to base his trading decisions off of.