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.