Why Price Action Trading Works? Spotlight on the Money Spot

This is the 3rd installment of the 3 part series on "Why Price Action Works?".

Part 1: Understanding the Big Players and Part 2: The Mysteries of Human Behavior are really important for understanding how the market works and if you understand what's been covered so far, you are ahead of at least 90% of the world. 

If you understand, you are already a step closer to financial freedom.

Let's talk Money Spot

For all of you who are members of Urban Forex and have studied the Mastering Price Action (MPA) course, you will be well aware of Money Spot and the magical powers it possesses! 

For anyone new, Navin gives an explanation of Money Spot at 44.44 min in the Webinar video. 

Money Spot is a strong example of when emotions can lead you down the wrong path.

As in Navin's example in the video: there are people who are waiting for the price to return to a particular area, but when it does return, their emotions mess with their mindset. 

Fear kicks in and they go against what they had planned and what they were waiting for.

Let's have a look:

Above, we have a bigger picture uptrend. $5.00 at point A looked like a great price but we missed it and it has already risen and its rising fast.

It gets as high as $6.00 (point B) and we think how nice it would have been to get in a $5.00. We think if it was to pull back to this price that we would definitely buy the next time.

Then it starts to pull back. Great, we might get the chance to buy.

But when we look at it again and see the speed it drops to points C and point D ($5.70 and $5.40 respectively) our emotions kick in.

Fear is there and we second guess our original plan.

We get caught up in the movement and because it came down so aggressively to points C and D we think, wait a minute... this is actually a sell.

The support equals resistance at point E says sell... on the smaller timeframe, but when you look at the bigger picture the support equals resistance says to buy... that is the Money Spot.

The big players want to go long and the short term guys are looking to sell.

So, who wins in this situation? The big boys or the little guys?

It's usually the big boys!

The big boys see all these people selling at discounted prices and start rubbing their hands together and buying. Then when the market starts to go up again the person who changed his mind thinking it was a sell realizes (but too late) that he was right the first time and it was actually a buy.

When they go to buy, who's there to sell it to them at a higher price... it's the big boy... again, happy to make a quick profit.

What we've learned

Over the last 3 articles all on "Why Price Action Works?" we have gone over a lot:

Why Price Action Trading Works? Understanding the Big Players looked at the Big Boys to see how they play the game since they are so good at it.

Part 2 focused more on the mysteries of human behavior and the relevance it has on the market.

And then in Part 3, this article, we put the spotlight on the Money Spot. 

Does Price Action Trading Work?

Yes, if you can understand how the market works, how the big boy works and how our own minds work.

Do you believe in price action trading?

Have you mastered it yet?

Let me know in the comments below.

With Pip Love,

Garry at Urban Forex