Recently I have been showing you how to use price action to enter trades. However, there is a whole other side to price action that is rarely discussed…
… Using price action techniques for avoiding bad trades.
I am a very conservative trader. While my strategy usually shows ten or more trades per week, I tend to only trade two or three of them. This is because I usually filter our all but the best trade set-ups. Not everybody who trades my strategy does the same though. There are some traders who take every trade they can catch. There are some who filter out some trade, but aren’t as picky as me.
In the end, there is no right or wrong way to approach the strategy. As long as you follow your money management rules and your trading plan, you should be okay.
Using Price Action to Filter Out Bad Trades
If like me you want to filter out as many bad trades as possible, price action is the best way to do so. In the video below I show you a recent bad trade, and how using price action would have saved you from this trade.
Avoiding Bad Trades
In the end, you will never be able to avoid all bad trades. However, by using a few simple price action techniques, you can avoid a lot of them. In this trade, a simple combination of minor resistance and a bad risk/reward ratio kept me out.
One important thing to note is that you shouldn’t be overly cautious. If there is minor support or resistance in the way but you can still set a good target, the trade may be worth taking. You need to learn to find a balance between smart caution and skipping every trade.
If you enjoyed this video, or have any questions, please leave a comment below. I try to reply to every comment.
If you want to learn more about how I trade Forex, check out my free Forex Price Action strategy.