There really is no clear and easy definition of “price action trading.” This statement could mean different things to different traders, but in the broadest sense, this manual will consider price action trading to be the aspect of trading from clean charts without the use of broad based indicators or any special and expensive trading programs. A price action trader must learn to spot the trend and then the formations that consistently appear on his or her chart over and over, while also using independent analysis to determine when to enter and when to exit the market.
Before delving into this trading system and the techniques involved, I think it is important that I discuss a few things that I think are critically important to making money day trading equity index futures.
First of all, you should already have a basic understanding of what a futures contract is and how futures are traded. There are many books and any number of free web sites that will explain this to you in better detail than I can, so I will ask you to do that home work on your own before moving forward with your studies of this manual. Also, these techniques will work on any chart, in any market and on any time frame, so you can use them to trade stocks, bonds, futures, forex or any other market. However, I prefer and recommend the ES (S&P Mini Futures), because of the liquidity, available leverage, low day trader margins and low cost commissions.
Secondly, this book is about learning how to easily trade from pure price action. You will not need to learn how to use any fancy indicators or even look at more than one chart or screen at a time. While it will probably seem very different from any previous trading lessons you might have taken, you will find that all you need to trade profitably is one chart and the ability to draw trend lines and horizontal lines. Nothing more is needed and anything else is discouraged, as it will only distract you from what you really need to know and see to make money.
If you don’t remember anything else in this introduction, please remember what I am about to tell you, as I think it is the key to early trading success. I believe that most new day traders come to this business with thoughts of getting rich quickly, and in my opinion, that is why and where most of them quickly fail. What this book is going to teach you is not a get rich quick scheme, but rather a way to make a living. It will show you how to extract a daily salary that will eventually make you rich if you stick with the program.
If you day trade the S&P mini futures (ES), the regular open is at 8:30 AM CST, and the regular close is at 3:15 PM CST. Taking those hours as a starting point, even if you trade all day, your working hours will consist of a six hour and 15 minute day. The techniques that I am going to show you will allow you to start small and work your way into any size daily salary that you care to make, with only the size of your ambition and your trading account balance as limiting factors. The ES actually trades 23.75 hours per day, 5 days a week. It opens around 5:00 PM CST on Sundays and trades through 3:15 PM CST on Fridays, although it closes for 15 minutes every day between 3:15 PM and 3:30 PM CST. However, trading after 3:15 PM CST is considered “after hours” trading. The after hours volume is much thinner and the moves are very slow and methodical most of the time. If you don’t mind trading in a style that is similar to watching paint dry, you can trade almost 24 hours per day in the Index futures markets. Price action is the same in the after hours; it just moves slower and usually has less volume.
Most new traders would consider making $100 per day as a failure, yet most failed traders probably easily made $100 on many of the trades they took before allowing that winner to turn into a losing trade. If you make only $100 per day, with approximately 240 trading days per year, then you are on your way to making $24,000.00 per year as your own boss, from your own home, with no products to sell, no clients to call upon and no employees to manage or deal with at any time. Trading futures has been called the “one perfect business,” and I have to agree with that description.
What this book is going to show you is how to extract a daily profit goal from the futures or any other market with minimal risk, minimal market exposure and only a small start up account. When day trading stocks, you need a “minimum” trading account that is over 25K, plus you are limited on your ability to go short, and you are also limited on the number of shares you can buy or sell in many stocks.
