Introduction.
If there is something I have learnt over the years, is that everyone uses price action during trading whether knowingly or unknowingly. In this article, we will see what price action trading is in the forex market space.
Price Action Trading.
The term "price action" refers to any phenomenon that occurs in the market. Price action can include price fluctuations, such as increases or decreases, as well as changes in volume and open interest.
Price action is simply a way of predicting where prices will move before they do so based on different factors such as technical & fundamental analysis. Traders who use this strategy look at what happened on previous occasions when prices moved in similar ways, and then try to predict where price will move next. They make their predictions by looking at the previous price movements.
This type of trading is different from technical analysis because it requires a much broader, more general knowledge of the markets than just technical indicators which in our opinion lag behind. To best understand price action, first start by clearing all the indicators from your charts and watch the markets during high volume times to understand how price moves.
Price action strategies are used by professional traders and investors who sometimes have access to sophisticated computer software that can analyze these charts & get a bias for either intraday or swing trading. For those without access to these sophisticated computer software, the brain is your greatest tool as you will have to condition it in a way that it will recognize certain profitable candlestick and chart patterns based on past evidence.
There are many different types of price action strategies, but all of them rely on identifying certain patterns or clusters on a chart. These patterns can be very subtle and difficult to identify, but when they are correctly identified, they can indicate significant changes in the price of an asset or security.
Price action trading can help you make decisions on when to enter or exit an asset class based on its recent performance. For example, if you see that a stock has been trending upward for some time and then reverses direction, it might be wise to choose another investment option rather than buying back into this asset class at this point. On the other hand, some investors might sell this asset class anticipating that it will loose value over a certain period of time.
Conclusion.
Personally, I have been using Price Action for more than 3yrs and it made a really huge difference in my trading & I would honestly recommend new traders to first learn how to read plain charts without any indicators. Indicators do lag so watch candles & patterns form during high volume times to train your mind to look for profitable patterns which you can actually take advantage of.
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