Pip, I'm a long-time stocks trader (15 years and counting). In stocks you have accurate T/S and Levels and you can use computers to quantify OF and execution/cancellation of orders. Everything is "clear" at least when compared to FX. Guess what? Stock pros have come up to all sort of gimmicks to hide their intentions in the clear and even having a L2 book, a T/S etc (and there're markets where T/S are much more accurate as well as L2 as opposed to US market), you can't be always sure what's going to happen.
The outcome is that OF-T/S-L2 has some predictive value, but that value is very limited in time and expires moments after being obtained (that is: your window lasts seconds or fractions of the second, hence the need for good execution).
What you need to do is move to the next level. You must absorb all information that is given to you and then "sync with the market". Man I know this will sound as voodoo, black-magic, witch-hunting etc to most of you, but when you get there you'll understand.
Like a pro piano player, you look at the music sheet and don't need to read each and every note. You can "feel" what the composer wanted from you: and you execute. Learn the music, forget the music, play!
Same goes for trading. You float in the ocean of information, rumors, charts etc. You must sync with this ocean. You must feel what others are doing and you must know where to put your bets to profit from other people actions. Let me say it again: You don't focus on the market. You focus on people. People generate orders. People are driven by their emotions. People use techniques to help them control their emotions, so you need to understand those techniques too.
I think this is what DS refers to when he talks about a state of mind. It's not easy to obtain and it's only partially mechanical. Some of it is on a subconscious level somewhere inside our brain (which btw is the best neural-net computer you can get). This state comes from a deep understanding of all the ingredients that make up the market. Market mechanics, order placement, S/R, and different strategies all make up for this.
So how can you do it? I can give you direction. It's not much different to what you have already read thousands of times.
Take a chart of a cross. Look at different time frames. Identify S/R levels (you don't need to draw them, just paint them in your mind). Think about M/A, Fibs, high/lows and other potential areas. Orders tend to cluster around these areas. You don't need to see orders. All you need to know is that they're there (being in the L2 book, in the brockers private books, in the heads of the traders doesn't matter... they're there even if they're hidden). Experience and knowledge can help you.
Now watch what price action is when price reaches those areas: Is there an acceleration ? Is there hesitation ? What the speed is ? What the direction is ? Is there oil poured on the fire ?
Look at different TF and try to feel what each trader might be thinking when starring at the same chart. Would they be buying ? Selling ? Panicking ? You get the idea.
That's all. KISS. Now go and profit.
http://www.forexfactory.com/showpost.php?p=3852614&postcount=902
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