Have you ever thought about who is participating in the foreign exchange market besides your fellow retail traders? If the answer is no, you should certainly change that. Although we can not have direct insight into the order books of the large banks, we can identify some of the characteristics of important market participants and use this information in our trading.
Price patterns are visual representations of human behavior and occur often and in similar form because human psychology doesn’t change. Every price print, bar, or candlestick is formed because of decisions that have been made by active participants in the market at that point in time. As traders studied charts over time, they noticed certain patterns repeating and have developed strategies to make their own trades based on these patterns.
In today’s markets, many traders use price patterns as entry signals and thus create strong order flow that we, as order flow traders, can use to our advantage. Because our goal is to metagame the participants that use this style of trading, it’s important that we stick to the most popular and widely used patterns. We’ll be looking at the 5 major price action patterns that have found their way into current market lore.
What is an Edge? How can you find one? Where do you start in your search for one? Shall you stop once you found one? How can you readily quantify your edge? And how many edges can the marketplace host at any one time? A trader's edge is what defines his style and ultimately what differentiates his decision-making process from a coin toss. It's his material advantage.
Trading brings out the best and the worst in us, mainly because it stacks us up against the most difficult thing to accept: uncertainty. As humans, we just don't like the fact that even through extensive work and preparation, things can still go sour. What's worse is that things can go sour even when we do the right thing, which can be really difficult to accept. One trait that allows successful people to bounce back from failure is a resilient mindset. In this article, we're going to explore what separates those that can get back up from those who just get beaten by their situation.
The Swiss National Bank has recently attracted more attention to the Foreign Exchange market than ever before. Once again, at the Order Flow Trading Academy we wish to keep aspiring traders on the right path and away from trends like this. Many traders are attracted to FX because they are told that it's the “most liquid instrument to trade”. In a previous article we touched on the actual issue of liquidity in the FX market – which is being reduced, not augmented. In this article we are going to explore the actual value – if any – of liquidity and what is instead important for trader profitability (big hint: volatility!).