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LEARN FROM GENERALS OF THE MARKETS – PART 30
“Master price action and you will be well on your way to successful trading.” – Nick McDonald
Mike Baghdady is a highly experienced trader with far more than 3 decades of experience. He’s been called Mr. Price Behavior. He’s a world leader when it comes to the mastery of price actions. He graduated from the American University at Cairo in Egypt. This expert, who was termed the World Live Trading Champion in 2009, was formerly an apprentice at a big investment bank in New York. In 1987, the American Chamber of Commerce magazine ‘AmCham’ awarded him the ‘Trader of the Year.’ He was also a physical grains trader in a commodity house, and has developed price behavior rules that can be used to master many financial markets. As an instructor, he’s advised major hedge funds and multi-national companies, including floor and private traders. More information on what he does and how you can benefit from his knowledge can be found at Trainingtraders.com.
Lessons
What does Mr. Price Behavior have to say?
1. Yes, price is king. The most important indicator in any financial market is the price. It’s the best tool to use in analyzing the current situation in the market and what traders are now doing. When you study price behavior and you master it, you’ll have a deep insight into how the markets behave and how you can take an advantage of that. No matter the strategy you use, you would do well to use it in conjunction with price behavior methodology and techniques. There are traders who’re highly experienced as a result of their price behavior mastery. Unfortunately, many coaches don’t teach this.
2. A trending market would continue to trend until there is a factor that forces it to change its course. It’s more likely for a market bias to continue than to reverse. The price doesn’t move in a straight line. Oscillators which pinpoint overbought and oversold conditions mayn’t be effective in strongly trending markets. That’s why one would do well to stop trading against the trend simply because there are temporary reversals in the markets. It’s better to take those reversals as the opportunities to enter the markets at better prices.
3. When there is some decrease in the momentum of a bias, it doesn’t portend a change in that bias. It’s only a transitory equilibrium phase prior to the continuation of the bias. A bias wouldn’t just stop without showing some potential reversal patterns, which are called chart patterns. It may take a long period of time before a confirmed bias changes.
4. It’s professional to evaluate your speculative activities based on whether or not you follow your trading rules, without attaching too much importance on the outcome of each trade. The outcome of each trade is beyond your control, so what you always have in your control is making sure you execute your trades flawlessly. If that’s the case, it would be easier for you to exit a trade at a predetermined market level, should the trade move against you. There would always be times when some trades are in the negative zone. This is what traders hate, and if you find yourself in this kind of undesirable situation, the best thing you can do is to close your trades quickly, otherwise, the more you run the loss trades, the huger the negativity.
5. According to Mike, the numbers of those who venture into the financial markets are increasing rapidly, while most of them don’t know what it takes to be successful (they make many errors when trading). It takes a long time to become consistently successful in the markets. For some, the learning curve might be sped up (though it can’t be bypassed). This means that some learn quickly and master the markets faster than others. While some adapt quickly and become pros in a few years, others would have to struggle with the markets for many years before they can become triumphant. One quicker way to trading mastery is to copy the techniques from successful traders. This can be your edge; even if you’d tweak the methodology to suit your personal needs.
6. You can read many books about trading, take many courses and go to many seminars, but it takes real practice and enduring patience to learn the art of trading. This can be done risk free on demo accounts (you see, online trading is arguably the only business where you can test your trading ideas on real market conditions without risking your capital). As you gain more confidence and expertise, then you may go live and start growing your portfolio as you begin to mature as an expert.
Conclusion: All chart readers want to call trades with a high degree of accuracy. Since this mayn’t be viable, the most logical thing to do is to look at what the price is saying and trade what one sees, coupled with good money management and effective risk control. So devising a trading methodology may be ineffectual without considering the unpredictable nature of the markets. Your analyses ought not to be based on certainties and blind courage, but on price realities.
One article from Mike appeared in TRADERS’ September 2008 edition (www.traders-mag.com), the quotes below were taken from that article:
1. “No-one knows where the next tick in price is going to be so the key to making money in trading is minimizing our risk and taking small losses. Try never to take big losses and always try to place the odds on your side. Profits will then take care of themselves.”
2. “If you chose to use some technical indicators, they should be used as tools to confirm your trading decisions, rather than depending solely on them to initiate a trade. Simply taking trading signals off an indicator, or analyzing several indicators at the same time usually would have a negative effect on a trader’s bottom line. It is very important that you’re able to make a trading decision based on your observations of price action and what you see on the chart.”
Source: Paxforex.com
Ground-breaking lessons from expert traders: http://www.harriman-house.com/experttraders
