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Essential Price Action Trading Strategies

Nov 23, 2024,

Key Price Action Rules for Traders

Introduction

  • Mike Bellafiore, from a top proprietary trading firm in NYC and Miami.
  • Focus on developing seven and eight-figure traders.
  • Lecture is about three crucial price action rules to enhance trading success.

Common Problems for Traders

  1. Premature Trades
    • Traders often take trades before they fully develop.
    • Results in mental, emotional, and financial exhaustion.
  2. Entering without a Plan
    • Traders jump into trades without a solid strategy.
    • Excitement often leads to rushed decisions.
  3. Improperly Adding to Trades
    • Panic adds to trades can reduce expected value.
    • Need for structured approach to enhancing positions.

Price Action Rules

  1. Understanding Continuation Trades

    • Beyond breakouts and fades, focus on continuation trades.
    • Touch and Go Trade:
      • Capitalizes on existing trends.
      • Uses human pattern recognition.
      • Example: Break lows, retrace to prior support-now-resistance, then continue.
      • Utilize 15-minute and 1-2 minute charts.
    • Leverage natural pattern recognition; sustainable moves post-breakout.
  2. Starting with Your Stop

    • Set stop-loss before trade entry.
    • Protects against market randomness.
    • Ensures ability to calculate Expected Value (EV).
    • Example:
      • Identify stop level at trade entry.
      • Calculate risk and reward ratio.
      • Use available EV calculator tools.
  3. Adding to Winning Trades

    • Add only when it's a new trade opportunity.
    • About 20% of trades offer viable add opportunities.
    • Example:
      • Define stop on new trade setup.
      • Add only if conditions support a new trade.
    • Strategy for high success probability trades, trail stops, and exit.

Summary

  • Three key adjustments:
    1. Continuation trades.
    2. Start with a defined stop.
    3. Add appropriately to winning trades.
  • These small changes can drastically improve trading success.
  • Encouragement to focus on eliminating few major issues.

Further Learning

  • Free webinar for more strategies.
  • EV tool video available for deeper understanding.
  • Links provided for additional resources and tools.