Hello traders and welcome to another lesson. Many people ask me these questions via email. “Is price action dead?”, “Is Forex trading real?” and so forth and so on literally we can go all day long posting these questions since they are too many of the same nature. Through out my trading career i have witnessed markets evolving more than three times. This is caused by many factors one being substantial increase in retail traders all around the world. When i started trading years ago, Daily volume averaged around four trillion dollars a day. Today we are talking of 6.6 trillion dollars volume transacted a day, so you can see the potential increase in retail traders and other Forex activities worldwide.
As volume increases the market receives millions of traders who transact on a daily basis making this an opportunity for the big players to reap off the hard earned money of these new traders. They take your money in a smart way leaving you with hopes and dreams of becoming rich. I will give you one example that will blow your mind. Why do you think many brokers offer you free education and free indicators that we all know they do not work? Why many brokers offer you a minimum deposit of up to $1 with insane leverage of up to 1:3000? First of all you should understand that these type of brokers are not regulated from strict regulations like the FCA and their job is to make money from clients deposits and losses which in turn benefits the Institutions.
In the Forex market structure we have the following chain
The top two guys are the one that benefit a lot because retail traders are loosing money everyday. I am not in war with the brokers and big guys but i am keeping things in perspective so as a new trader who want’s to start trading as a career should be careful and be serious at his trading because if he/she messes up then the top two guys benefit at a minimum cost. I can dive deep in this subject about the TRUTH OF FOREX TRADING AND HOW TO BYPASS BROKERS FOR SUCCESS but it is a long lesson with sensitive information. Let us leave it for next time.
Back to the Title of the Lesson.
The pin bar and head & shoulder is used by wide range of traders in the world but today i will focus with the pin bar since the information i will give you today applies the same.
It is a very popular candlestick pattern and many traders use the pin bar to make trading decisions. I get a lot of questions about pin bars and most traders are very frustrated because they just can’t seem to make them work. But why is that?
The pin bar can be a great trading signal, but if you don’t know how to trade it, you’ll easily lose a lot of money. Here are the main reasons why most traders lose using the pin bar:
- It’s a very obvious signal and the professionals know exactly how the amateurs use the pin bar
- If a signal is too good to be true, it usually is – the obvious pin bars will get squeezed easily
- Traders use the pin bar without context and do not understand what is happening on their charts
- A pin bar alone is a very weak signal and used by the big players to lure traders to take positions and squeeze them out.
A few years ago, the pin bar was a good signal but today, you’ll see squeezes, failed pin bars and very delayed signals all the time. The reason is that all traders act the same way on pin bars and the professionals use that knowledge to drive price in a way that forces amateurs to lose money. This applies to the head and shoulder strategy as well and other famously known price action strategies.
These price actions strategies are very obvious and are traps that are used by the big players to squeeze them out of their positions quickly and make a quick huge profits.
Through out the years many traders rely on price action and to be honest it is dead, since markets are evolving from time to time from the reasons i have mentioned in the early paragraphs. Advanced technical trading in combination with qualitative analysis is the new thing though it has been existing for a long time now but only institutional traders have been paying attention. Retail traders are busy looking for quick fixes and the outcome is devastating we all know that.
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Raymond is a professional currency trader with experience of 4 years trading the financial markets. Certified Risk Manager and Contributor at profxtigers.com
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