Traders,

I hope everyone had a great week and is kicking the weekend off on the right foot. The last few weeks I had some emails about the price action setups and ideas I share in my letter so I want to expand on some of that and talk about price action and the main question that came in on “how long it took me to get it?”

When I look at price charts I can analyze it from a lot of different perspectives:

The idea here is that there are two approaches:

This is not to say one is better than the other but it is to say that the objective analysis takes longer to learn and I think when new would be investors come in they go for the low-hanging fruit of “easy setups” but then eventually progress into a deeper understanding which is required if you really want to extract money from all of this.

When I look at setups I really only ever take into account the price action and nothing else. Here and there (like this recent idea on $TGT ( ▼ 1.73% )) I borrowed some notes from the report on why I thought this move would happen but ultimately the price chart set-up is why I liked it.

This setup below is a repeatable price-action setup.

There is a lecture series here that we don’t push much (but is beneficial) called The Active Trader lectures that covers price-action trading with “Playbook Setups” and then objective price action analysis.

Both work.

The difference is this: if I were to ask 10 traders to analyze the chart of $MSFT ( ▼ 0.59% ) for me I would get 10 different answers.

If I were to ask 10 traders who took the approach in this lecture (or any system) then you would get 10 of the same answers.

That’s the difference between objective price action analysis and price action setups.

Take for example last week when I talked about how to trade the $SPY ( ▼ 0.07% ) gap up into the highs we traded last week.

That’s not a “trade setup”, that’s me just looking at the chart and understanding price levels which I do use and are in that lecture series as well.

I personally believe you need to be able to do both and obviously the benefit I think all could agree on with using price-action as the lead analysis tool allows you (among other things) to:

At the end of the day price-action and charts are the analysis tool that I apply and setups and objective analysis on them are key to this but as you’re attempting to learn I think it’s easier to focus on Playbook Setups first.

I didn’t have that when I started back 10 years ago because there was only a shorter-version of the now SAT Lectures to teach me.

To conclude this I would say all of you learning this approach, try to really understand your setups at a level where you repeat them because once you can do that then you can build on to other strategies.

And finally, try to get it as BORING as you can because once you can do that then that is the “sign” that you’re getting it.

Enjoy the weekend and see you tomorrow with the letter.

Trader X