I ONLY Focus on These 2 Things In Trading (2024)

Now, in trading, there's 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. Now, in the technical part, there's two things that we should all put all of 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 try to find some magic, 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 line 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, or how I should actually manage my position. And over time, I realized having so many different indicators and having so many different things on my chart was actually just noise. And, 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. So now let's break down what volume is. So volume is the transactions in the marketplace, right? So 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 it's 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. If we see volume at 10, that means 10 contracts or 10 shares or 10 whatever were transacted at one price. That means 10 buyers or 10 shares from one side had to be sold. And 10 shares or contracts from one side had to be bought, which equate that number 10. 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 are, they essentially overlook this part or overlook this component of volume. Right now, to decipher who's strong, stronger, we have something called an auction market theory. So the market is a whole auction place. We have buyers and we have sellers, as mentioned, trying to find an equilibrium in price on every transaction. We have something that you guys have seen before where we have the bid and we have the ask. Now, in the bid and ask, the way that works is we have people that place orders, we have traders that place orders, institutions that place orders. 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. 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 a limit order, you start seeing that on either the bid or the ask. So if a financial instrument is going higher and higher and volume is also going higher and higher, that means that there is a support of interest at those buying levels or those new levels that the market is going to. But imagine the price of something is going higher and higher, but volume is staying flat or volume is going lower. The low volume is indicating that there's no interest at those levels. But if volume keeps going higher and higher, the that will showcase that we are seeing interest at those particular levels. So that's the basic understanding of how volume is one of the most important things, which is right next to price action. 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 volume 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'd like to focus on what is happening in the market. What is the action that the market is showcasing me? What is the accepted price that the market wants, what direction is the market going in? 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. 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's 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 imbalance in aggressive buying and aggressive selling. And sometimes we might see aggressive buyers step in and they might drive the price higher. And we kind of see that on charts. And seeing that on charts allows us to visualize and understand what the market is telling us, right? Is the market actually strong? Is the market actually trending? Is the market having a strong breakout or breakdown? Is the market really selling off or is it just a trap? And putting those two things together gives us a huge understanding of the market within itself. So one indicator, RSI, people say, well, if RSI is above 70 or if RSI is below 30, you should buy or you should sell, whatever the case is. Right now, what you guys have to understand is RSI is a lagging indicator, which most indicators are. Not every single indicator, but 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 no matter what happens in the market, the indicator or majority of the indicators will always be behind. And the two things that will be ahead is price action and essentially volume of the transactions that is happening in the marketplace. So if you have indicators, you have a ton of nonsense on your chart. Take it off and simplify your trading. And like I said, focus heavily on price action and volume, and use these two things to build your trading strategies. Build this to build your playbooks, use this to build a strong understanding of markets, strong understanding of why the markets are going up. Where are we seeing an imbalance in price? Where are we seeing an imbalance of strength in the overall market? And that will help you understand everything on a much deeper level instead of, you know, clogging your charts up with useless data. Now, if you are a more advanced trader that has been trading for, you know, 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, right What I'm touching right now is just a surface level. There's deeper layers in this that we want to understand. That where we can really truly understand the strength, the imbalances, where real supply is sitting, where the traps are sitting, where we have issues with liquidity and so on. There's 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. Don't go looking for any sort of crazy indicators, don't draw a million crazy lines in your charts. Don't look for crazy chart patterns. Understand volume and price action. Combine them as layer one and like I said, in the upcoming weeks we will build onto layer 2, 3 and 4. With that being said, I hope you guys found value in this video. Comment down below, let me know what you guys use in the markets to trade, what indicators you use, what has worked for you. 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 and if you did, give it a thumbs up and give it a follow. Thank you so much and I will see you on the next video.