jonchew38 - What transformed your trading

What transformed your trading? What gave you an edge where after learning it or discovering that eureka moment, you started to make money trading?

For me, it was learning how to read price action / volume. That was my eureka moment that transformed my trading. If one knows how to tell a story by reading price action, one can easily make a living trading. You see, like many, I started out first following indicators and when indicators did not work as well, I gave several excuses to the point that I thought I have not mastered how to read indicators. All those while, I have ignored the most fundamental aspect of TA - all indicators derive their figures from the basic price bar or candle - open, high, low and close. After I realized this, I started learning price action and volume analysis in earnest. There is a lot of information there and all that is needed and nowadays, I do not need anything other than a price candle chart with volume.

This is best illustrated by an example. If one sees a large red candle showing a large sell off and on high volume, the inclination is to conclude that price action is extremely bearish. However, there are several ways this may pan out. If the next candle is a small range one, closing neutral and on high volume, what does the 2 candles tell you?

This are the possible scenarios:
1. Very bearish, resting day and potentially continue to sell off from here
2. Bullish, the high volume suggests that there are also bulls resisting the bears and hence the high volume. The second candle shows that the buying and selling pressure are about equal but if the scenario is supposed to be bearish, we should expect another wide range red candle on heavy to moderate volume. Why is this not happening? is there absorption happening and the smart monies are taking advantage of a bearish news to buy on the cheap?

On scenario 1 above, one would sell. On scenario 2, one would await an opportune time to buy.

So you see, there are many ways to interpret price action and one can see cues from the price action. And this is how it has transformed my trading - by looking at the overall context of the market - I can identify if the market is in an absorption phrase, preparing for the next swing higher or if a sell off is genuine and I should short instead of buy. (since then, I have stop looking at all the common indicators like RSI,MACD etc. I found that the big boys use those to game the retail players)

So what is your transformation moment? Share here for everyone's benefit.