I ONLY Focus on These 2 Things In Trading (2023)

I ONLY Focus on These 2 Things In Trading (2023)
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Psychological Part

“Now, in trading, there are two different parts. Part one is all psychological, and part two is all technical. Now, we’re not going to focus on the psychological part, but we are going to focus on the technical part today. In the technical part, there are two things that we should all put our focus on. Those two things, in my opinion, are price action and volume. We want to put all of our emphasis on price action and volume as much as possible.

Now, I see a lot of traders, when they get started, they focus on indicators. They’ll try to find some magic thing in the market that will tell them when to buy, when to sell. Now, I will be the first to tell you that that does not exist in the market. There is no magic indicator or no magic anything. But what does exist in the market is understanding who is strong. Is it the buyers? Is it the sellers? Who is more aggressive? And the two components that we can start off on an introduction level to understand that is by focusing on price action and volume, as mentioned before.

Now, if you have so many different lines, indicators, and things like that on your chart, just get rid of it. When I first started out trading over 10 years ago, my chart was filled with so many indicators, so many lines on my chart, and I wasn’t able to identify what’s a good point to enter, what’s a good point to exit, And the two things that everything boils down to is price action and volume. Now, I keep repeating these things because I want it to be hammered into your brain to understand that these are the two most important components of trading.

The Marketplace

So now let’s break down what volume is. Volume is the transactions in the marketplace. If you see something that has a volume of one, that means there has been a transaction of one sale. Now, one thing that people get very wrong about volume is they think that volume indicates there’s more buyers or more sellers. There’s no such thing as more buyers or more sellers in the market. But what does exist is seeing more aggressive buyers or more aggressive sellers. So when you see something has a volume of one, that initially means that there was a buyer and a seller. They agreed on a price, and the transaction happened.

Now, what we can decipher from the volume is we can decipher if the buying side is more aggressive than the selling side. That is something that we can decipher by volume. A lot of traders essentially overlook this part or overlook this component of volume. Now, to decipher who’s stronger, we have something called an auction market theory. The market is a whole auction place. We have buyers and we have sellers, as mentioned, trying to find an equilibrium in price. When they place orders, they either hit a market order or a limit order. And in the marketplace, we can see this happen on level two. We can see the bids; we can see the ask, and we can see everything being executed on time and sales.

The Limit Order

Now, obviously, if they’re placing a market order to sell, they’re being aggressive on the buy or sell side, depending on what side the market order is going in. Or they’re placing a limit order. Now, when they place the limit order, you start seeing that on either the bid or the ask. The low volume is indicating that there’s no interest at those levels. But if volume keeps going higher and higher, that will showcase that we are seeing interest at those particular levels.

Now, as I mentioned, there’s a lot more to volume. There’s a lot more to understanding order flow. There’s a lot more to understanding the auction market theory that the market operates off. But before we dive into that, like I said, let’s go into the second part, which is understanding price action. Now, to me, price action has always been king. That’s one thing I really focus on. I like to look at what price is telling me. I like to focus on what is happening in the market.

And once again, I combine that with volume, as I mentioned. Now, in price action, there’s a lot of different components that you guys can look at. It goes into looking at candlesticks, goes into looking at supply and demand, goes into looking at support and resistance. You know, just putting those pieces together, and the idea is to understand where the strength is, to understand what areas is the market comfortable in trading, right? What area is the market accepting a certain price? Now, if the market thinks that the market’s current share price or stock price or forex price or whatever it is is at a fair value price, the market will trade around those levels.

Now, there are times that that fair price will adjust due to economic news, due to Fed announcements, due to earnings or something, you know, that presents in the market. And that will create that imbalanced and aggressive buying and aggressive selling.

And putting those two things together gives us a huge understanding of the market within itself. So, one indicator, RSI, people say, ‘Well…”

The Indicator

“If RSI is above 70 or if RSI is below 30, you should buy or sell, whatever the case is. Now, what you guys have to understand is RSI is a lagging indicator, which most indicators are. Not every single indicator, but the majority of indicators are lagging, meaning that price has to formulate first, and then the indicator follows. So, that makes it a lagging indicator.

So, if you have indicators, if you have a ton of nonsense on your chart, take it off and simplify your trading. Like I said, focus heavily on price action and volume and use these two things to build your trading strategies, build your playbooks, use this to build a strong understanding of markets, a strong understanding of why the markets are going up, where are we seeing an imbalance in price

The Surface Level

Now, if you are a more advanced trader that has been trading for more years and understands price action, volume on a deeper level, like I said, I will make a video on order flow, how I look at the markets at a very deep level. What I’m touching right now is just the surface level. There are deeper layers that we will break down in the upcoming videos.

But if you are not exposed to any of this, once again, take a step back, simplify your trading, guys. Don’t overcomplicate it. Understand volume and price action, combine them, as I said earlier. And like I said, in the upcoming weeks, we will build onto layer two, three, and four.

With that being said, I hope you guys found value in this video. Maybe there is an indicator that works, and I’m not exposed to it yet. So, I would love to hear your thoughts. And with that being said, I hope you guys found value. If you did, give it a thumbs up and give it a follow. Thank you so much, and I will see you in the next video.”


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