USDJPY Trade - Typical PA Trading vs True PA Trading

Just want to quickly use a USDJPY trade to answer a comment made on my previous post.

USDJPY M30

USDJPY M5

USDJPY M1

So here is my take on how typical PA traders will trade this vs how true PA traders (Lovejoy style) will trade this.

Typical PA: Probably wouldn't even be looking at this because they focus on H4 and above and believe that LTFs are all noise
True PA: Sees a material false break into former demand with strong rejection back down, starts looking at LTFs to identify the SD structure and any potential trade opportunity.

Typical PA: Dismisses the setup because there is no pin bar or some favorite candlestick pattern
True PA: Understand that what is important is a strong rejection which indicates strong selling strength, candlestick patterns are secondary and unnecessary

Typical PA: If they decided to trade the false break, they will usually place the stop above the high of the breakout bar, which results in an unnecessarily wide stop loss and poor RR
True PA: Understands that the M1 former demand should hold for the trade to work out, and hence there is no need for a stop loss higher than that.

Typical PA: Have the mindset that the trade should at least yield 1:1 or more, and thus are only willing to TP when they're 1:1 or more in profits. Recall that they already have a very wide SL above the breakout bar high, and as such requires price to move a substantial distance before they will TP. They do not realise that 1:1, 2:1, or a TP based on moving average, Fib etc are just arbitrary levels with no logical implication. As such price often turns back on them and a winning trade becomes a losing or break even one
True PA: Understand that price moves from zone to zone, and there are certain ways to identify which zones/levels are significant and will cause a material reaction. Such a zone is used for the TP.

So in summary, I believe that SR and SD is all a true PA trader needs to be very profitable. Interpreting that correctly is the difficult part. In the above trade, my SL was 0.8 pips and the return was 4 pips, hence a 5R trade (excluding comms). I believe most traders would think that a sub pip SL is extremely tight, but really it is not about the SL size but the SD structure behind the setup. Also, if one were to focus only on the H4 and above time frames, the above setup isn't even visible and is probably only a small move. However this small move if played correctly using multi TF analysis down to M1 is actually a 5R trade within 45 mins.

Trading like that required a huge mindset paradigm shift for me as I came from the typical PA background. However I truly believe it is the most profitable way to trade, though quite honestly also the hardest I've come across. Hope this post helps!

Professional Trading

It has been many months since I last blogged. I came to a point where I realized many activities are good, but one has to prioritize and focus on the most effective and productive activities. As such, learning, practicing, back testing etc took precedence over blogging. In my last few posts, I mentioned that I have been learning a lot from TheTradersGuild (now known as LJ Forex Group), and it has been a tremendous learning experience since then.

To cut the long story short, I'm writing this post because I feel responsible to "caution" any readers regarding any other posts I've written in the past. No doubt trading is a continual journey of learning, and all traders start somewhere and pick up various things along the way, some good, some bad. I went through the same process, and my learning will never stop. However my entire view of price action changed after studying Mark (owner of LJ Forex Group)'s material, it is price reading in the purest form and makes total logical sense. 

As such, I just want to inform any readers to ignore any of my previous technically related post, be it strategies or vendor recommendation. In hindsight they're all crap. I'm particularly concerned because many of my top visited posts contain very amateurish material and recommendations to vendors which I no longer endorse. I just want to say this: candlesticks patterns are meaningless, it is ridiculous to only trade the higher TFs (H4 and above) with the excuse that the LTFs are just noise, claiming you only need 3-5 trades a month to trade for a living is also a senseless inefficient use of time. Gosh I'm tempted to state so much more, but I shall leave it at that, and shall avoid citing names.

In summary, I think in any craft it makes sense to seek out the best and learn from them. As far as trading is concerned, Mark is by far the best trader I've come across (and I do patronize quite a number of forums/sites). Add generosity, willingness to share, and a gift for teaching to that and he is really a gem. These days I devote entire days and wk ends solely on his material, and really hope to be able to achieve the kind of price reading proficiency and success that he is enjoying now. 

Mark often tells his students that it is very important to research, back test, practice, and work things out for themselves. That is the way to improve and gain confidence. A good trader should always have an inquisitive mind. I'm trying to live out that advice, and guess that is also the advice I would like to offer to any reader. 

All the best!