What’s up Traders, in this article, we’re going to be talking about Price Action trading (Price Action Analysis). What in the world is price action.
And how do you use price action to your advantage when trading and towards the end of this guide, I’m actually going to show you the best, the most simple price action, forex trading strategy that you could possibly ever learn.
So make sure that you stick to the end of the tutorial to see that because it’s going to blow your mind.
By the way, at the end, I’m going to show you something that gives you a 300% more likelihood of becoming a profitable Forex trader by doing one simple thing.
So make sure that you stick to the end, to make your trading elf easy, lucrative and fun. Go ahead and click the bell icon bottom the page as well and Allow the post notifications.
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Okay.
So in this article, we’re going to be talking about price action. We’re going to talk about what the heck is it, how to use it to your advantage.
I’m going to show you some examples of what you might look for as a price action trader. And then at the end, I’m going to show you a price action trading strategy.
That’s really, really simple that I promise you’ll get by the end of this tutorial. So that being said, what in the world is price action?
Definition of Price Action Trading your must be know
- What is Price Action and How does it work?
- What can you Learn from Price Action?
- How to make the most of Price Action?
- Price Action’s Limitations
Well, price action is simply the action that price is taking. I’m bet. You’re glad that you came to learn this tutorial, right? No, but honestly, price action pattern is simply what’s happening with price.
Okay, what is the action that price is actually taking? And in technical analysis, there’s kind of two schools of thoughts. There’s thoughts of using indicators and there’s thoughts of using price action.
Now, the challenge with indicators is that indicators are more likely than not lagging, where they’re basically lagging. What’s actually happening with price or the advantage to price action trading is, is the fact that you are getting the most real time data.
The most up-to-date current data of what’s actually happening with price in this very moment. Not what’s happened with price in the past, which is likely what will tell you from a indicator okay.
So generally when you’re trading price action, you are not using a lot of indicators, you’re generally looking at things like support and resistance.
Things like trends, things like trend lines, things like candlesticks because all of these things have more real time.
What is Price Action and How does it work?
The price movement of a securities plotted over time is known as price action. All technical analysis of a stock, commodity, or other asset chart is based on price activity.
Many short-term traders base their trading decisions only on price action and the formations and trends that can be drawn from it. Because it employs past prices in computations that can then be used to inform trading decisions, technical analysis is a derivative of price action.
When a security’s price is plotted over time, price action refers to the up and down movement of the price.
Traders might apply different styles to a chart to make price action trends more evident.
Price action is used to create technical analysis formations and chart patterns. Moving averages and other technical analysis tools are calculated from price movement and projected into the future to help traders make better decisions.
What can you Learn from Price Action?
Charts that plot prices over time can be used to see and analyse market action. To improve their ability to recognise and comprehend trends, breakouts, and reversals, traders use various chart compositions.
Candlestick charts are popular among traders because they make it easier to see price swings by displaying the open, high, low, and close values in the context of up or down sessions.
Visually interpreted price activity can be seen in candlestick patterns like the Harami cross, engulfing pattern, and three white soldiers.
There are many more candlestick formations that are formed as a result of price activity in order to predict what will happen next.
Other forms of charts, such as point and figure charts, box charts, and box plots, can use the same formations.
When computing technical indicators, many technical analysts incorporate price action data in addition to visual formations on the chart.
The idea is to uncover order in what appears to be an apparently random price fluctuation. An ascending triangle pattern generated by applying trendlines to a price action chart.
For example, can be used to predict a future breakout because the price action shows that bulls have attempted a breakout numerous times and gained momentum each time.
How to make the most of Price Action?
Price action is not typically thought of as a trading tool in the same way that an indicator is, but rather as the data source upon which all other tools are based.
Swing traders and trend traders prefer to deal with price movement rather than fundamental research, relying only on support and resistance levels to predict breakouts and consolidation.
Even these traders must consider other elements in addition to the present price, as the volume of trading and the time periods used to define levels all have an impact on the accuracy of their readings.
Price Action’s Limitations
Price action interpretation is highly subjective. When two traders analyse the same price movement, it’s common for them to come to different conclusions.
A negative downtrend may be visible to one trader, but the price movement may indicate a probable near-term turnaround to another.
Of course, the time period selected has a significant impact on what traders perceive, as a stock can have many intraday downtrends while sustaining a monthly uptrend.
It’s vital to keep in mind that trading recommendations based on price activity on any time scale are always speculative. The more instruments you have at your disposal to confirm your trading prediction, the better.
However, the price movement of a security in the past is no indication of future price action. High-probability transactions are nonetheless speculative, meaning traders accept the risks in exchange for the potential gains.
Price Action in the Forex Market
Price action trading is the same in all markets, including forex. However, there are several peculiarities to be aware of.
Although currencies trade 24 hours a day, even if a price action signal arises, some forex pairs are less likely to move when their respective markets are closed.
How to use Price Action to Trade Supply and Demand
Where sellers have entered the market aggressively and caused the price to plummet and not return, supply zones can be seen.
Traders keep an eye out for these since sellers may still be present and ready to sell when the price rises, forcing the price back down.
Where buyers have entered the market aggressively, demand zones form. Traders will be watching to see if buying picks up again, pushing the price back up, if the price returns to that level.
Trading System based on Price Action
All of the above technical indicators are available on online trading platforms, where price movement can be monitored. Technical tools, such as drawing and price projection tools, as well as customised charts, are available to you.
You may practise your price analysis skills by signing up for a demo account and trading with virtual cash, and then switching to a live account to trade with real money when you’re ready.
It’s best to concentrate on one method at a time and study it well. A well-traded solid technique has the potential to be extremely rewarding.
If you are looking to find a suitable forex broker, be sure to read the following guides:
10 Best Forex Brokers That Give The Most Value To Traders
9 Best Forex Brokers That Are Recommended For Day Trading
9 Best Forex Brokers That Are Recommended For Scalping
My reviews about the best forex brokers in the world that offer the most value and facilities to traders.
Read About:
IRONFX Review BLACKBULL MARKETS Review
XM Review PUPRIME Review
INSTAFOREX Review TRADEVIEW MARKETS Review
VANTAGE Review SUPERFOREX Review
INFINOX Review AVATRADE Review
EIGHTCAP Review
Price Action Trading Strategies: An Overview
- Price Action Trading Instruments
- Who Trades with Price Action?
- Price Action Trading’s Popularity
The features of a security’s price movements are described by price action. This movement is frequently examined in light of recent price fluctuations.
Price action, to put it simply, is a trading strategy that allows a trader to read the market and make subjective trading decisions based on recent and actual price movements rather than depending primarily on technical indicators.
The price action trading technique is reliant on technical analysis tools since it ignores fundamental analysis components and focuses more on recent and historical price movement.
Important: To make a quick profit in a short time period, many day traders use price action trading tactics. They might, for example, search for a simple breakout from the session’s high, establish a long position, and profit using rigorous money management tactics.
If you’re interested in learning more about day trading, Investopedia’s Become a Day Trader Course offers a thorough overview from a seasoned Wall Street trader.
In over five hours of on-demand video, exercises, and interactive content, you’ll master proven trading strategies, risk management approaches, and much more.
But you can learn any things about Day trading with my simple tutorial, I’m maked this content for help your, so not waiting and learn about day trading.
Price Action Trading Instruments
Because price action trading is based on recent historical data and price movements, all technical analysis tools(technical indicator), such as charts, trend lines, price bands, high and low swings, technical levels (of support, resistance, and consolidation), and so on, are used according to the trader’s preference and strategy fit.
Simple price bars, pin bar, price bands, break-outs, trend-lines, or complicated combinations including candlesticks, volatility, channels, and other patterns(chart pattern) can be noticed by the trader.
Price action trades also include psychological and behavioural judgments and subsequent actions as determined by the trader.
For example, if a stock languishing at 580 crosses the psychological threshold of 600 set by the trader, the trader may assume a further upward trend and enter a long position.
Others, on the other hand, may hold the opposite viewpoint: once 600 is reached, they assume a price reversal and take a short position.
No two traders will read the same price movement in the same manner since they each have their own interpretation, rules, and behavioural understanding of it.
A technical analysis situation (such as the 15 DMA crossing the 50 DMA) will, on the other hand, result in comparable reaction and action (long position) from several traders.
In essence, price action trading is a systematic trading method that uses technical analysis tools and recent price history to allow traders to make their own trading decisions within a given scenario, based on their subjective, behavioural, and psychological condition.
Who Trades with Price Action?
Retail traders, speculators, arbitrageurs, and even trading firms that employ traders use price action trading since it is a method of price prediction and speculation.
It can be employed on a variety of assets, including stocks, bonds, currency, commodities, and derivatives.
Steps to trading Price Action
Most experienced price action traders keep a variety of choices for identifying trading patterns, entry and exit levels, stop-losses, and other observations.
Having a single approach for one (or several) companies may not provide enough trading chances. A two-step process is used in the majority of scenarios:
1.Identifying a scenario: such as a stock entering a bull/bear phase, a channel range, a breakout, and so on.
2.Identifying trading opportunities within the scenario: Is a stock likely to (a) overreach or (b) retreat once it is on a bull run? Even in the same identical scenario, this is a wholly subjective option that can differ from one trader to the next.
Listed below are a few examples
1.According to the trader’s perspective, a stock reaches its high and then returns to a somewhat lower level (scenario met).
The trader can then decide whether they believe it will form a double top and rise further, or whether it will decline further due to mean reversion.
2.Based on the assumption of minimal volatility and no breakouts, the trader establishes a floor and ceiling for a specific stock price.
If the stock price is inside this range (scenario met), the trader can either take positions assuming the predetermined floor/ceiling levels will operate as support/resistance levels, or adopt the alternative view that the stock will breakout in either direction.
3.When a stated breakout scenario is realised, there is a trading opportunity in the form of breakout continuation (moving in the same direction) or breakout pull-back (returning to the past level).
As can be seen, technical analysis tools aid price action trading, but the final trading decision is left to the individual trader, providing freedom rather than enforcing a tight set of rules.
Price Action Trading’s Popularity
Instead of long-term investments, price action trading is better suited for short-to-medium-term restricted profit bets.
The majority of traders believe the market follows a random pattern and that there is no obvious systematic technique to design a strategy that will always work.
Price action trading has a lot of popularity in the trading world since it combines technical analysis tools with recent price history to uncover trade opportunities depending on the trader’s personal interpretation.
Self-defined strategies provide traders with flexibility, are applicable to numerous asset classes, are simple to use with any trading software (Like Moving Average indicator), applications, or trading portals, and allow for easy backtesting of any recognised strategy on historical data.
Most significantly, the traders feel in control because the approach allows them to choose their own actions rather than being forced to follow a set of rules.
What is the Strategies for advanced Price Action?
- Trading method for price rejection
- Renko approach for price action
- Scalping strategy based on price action
- Swing trading method based on price action
What is the most effective Price Action Indicators?
- Support and resistance Fibonacci retracements
- For momentum, the relative strength index (RSI) is used
- A stochastic oscillator can be used to spot trend reversals
Support and resistance Fibonacci retracements
On a chart, the Fibonacci retracement is drawn from a low to a high (in an uptrend) or from a high to a low (in a downtrend) (in a downtrend). It denotes places where the price might retrace.
23.6 percent, 38.2 percent, 50 percent, 61.8 percent, and 100 percent are the percentages. Pullbacks in a strong trend are usually shallow, reaching only 38.2 percent of the time. Pullbacks of more than 50 percent and 61.8 percent are frequent in most trends.
For momentum, the relative strength index (RSI) is used
The relative strength index (RSI) calculates the price’s position within a 14-period price range. The price is in the upper range of where it has moved in the last 14 periods when the RSI is above 70%.
The price is in the lower range of where it has traded in the last 14 times when it is below 30%. During trends, traders frequently wait for the price to move out of these zones to confirm trades.
Traders will attempt to buy when the RSI falls below 30 and rises above it during an upswing. Traders will try to short during a downturn when the RSI rises above 70 and falls below. To corroborate these signs, further price action cues are usually used.
A stochastic Oscillator can be used to spot trend reversals
To help spot turning moments and confirm price movement signs, a stochastic can be used. It’s similar to the RSI in that it’s utilised in the same way.
The stochastic indicator has two lines: the stochastic and the signal line. Because the signal line is a stochastic moving average, it advances more slowly.
A trader who wants to trade a price action signal should look for the stochastic to cross the signal line. They should wait for the price movement signal and the stochastic to rise over the signal line before entering a long trade.
If you are looking to find a suitable forex broker, be sure to read the following guides:
10 Best Forex Brokers That Give The Most Value To Traders
9 Best Forex Brokers That Are Recommended For Day Trading
9 Best Forex Brokers That Are Recommended For Scalping
My reviews about the best forex brokers in the world that offer the most value and facilities to traders.
Read About:
IRONFX Review BLACKBULL MARKETS Review
XM Review PUPRIME Review
INSTAFOREX Review TRADEVIEW MARKETS Review
VANTAGE Review SUPERFOREX Review
INFINOX Review AVATRADE Review
EIGHTCAP Review
Is Price Action Trading profitable?
Like any trading strategy or tool, profitability depends on how it is employed. Many successful investors and traders have all shown that trading price action trading can be profitable.
However, traders that focus on price charts alone and do not take into account fundamental factors, such as economic indicators and news announcements, may miss key events that have a major impact on the price of their security.
All profits and losses in trading are based on price. Price action traders focus on historical and current patterns to make money off where the price may head next. There have been many profitable price action traders, but it takes time to learn price action strategies, and spot trends, patterns, and reversals.
Disclaimer: MiladFX is an only free service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives.
Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
I’m make no representation that any particular investment, security, transaction, or investment strategy is suited for any specific person in the content.
The information has not been generated in compliance with legal regulations intended to encourage investment research independence.
Lets go to price action with example’s
Data of what’s actually happening with price now than necessarily what’s happened with price in the past as like a lagging indicator. So let me just go ahead and pull this up and I’ll just show you an example.
If you were trading price action, some of the things that you might actually look for. So one of the things that you might look for when trading price action is you might look for like support and resistance zone.
So you can see kind of right here, we had this support or resistance zone, it was a support in this scenario, obviously where we see prices bouncing off prices, bounced off prices, bounce off prices, bounce off prices, bounce off.
So you can see that this is an area that we may want to trade off of because this is the action of price, for example, you can see here that after that support zone, we saw this bullish candle coming up.
This is like a bullish engulfing candle. That’s really coming out. There’s a lot of momentum behind it, and again, one thing that price action traders will look for is they’ll look for candlestick patterns.
But then in this case, we’re going to keep it simple, we’re just going to look for a momentumor a big bullish candle coming off of it, which you can see here.
You can enter the trade, it would come in little, very little dry down, gets put your stop-loss below the zone or below this candle here.
And as you can see, price just took off really, really nicely. “Yeah”, that’s beautiful. Okay, So what do we see happening here? Well, price action traders.
Again, one of the things that they’re going to look for is support and resistance, and they’re going to look for trend lines and by the way, make sure that you stay tuned to the end of this tutorial, because I’m going to show you one simple thing that you can do to become 300% more profitable.
And I’m going to show you a simple forex trading strategy so make sure that you don’t miss that.
Okay, now, with that being said, what do we see here at price went off, Boom, it went into an uptrend and then what happened?
“Price consolidated” right?
Or price went into a ranging phase, and this always happens, one thing you want to know, is a price action trader is that the market always goes between these two phases.
It goes from a trending phase to ranging phase to a trending phase to ranging phase, and that always always happens. Okay, the market is always in a constant change between a trending and arranging phase.
So what happened here?
Okay. So we saw that price came up price kind of pulled back down, which we had expected uptrend, and basically we saw that there was this area of value, like right here or this, you know.
Support zone right here, which prices bounced off on the uh, before we could see here, at bounce off here, at bounce off here, at bounce off.
And now it’s bouncing off again, and we can see that price is struggling to break through this zone, so what do we want to look for? We want to look for some sort of momentum coming off of the zone.
That’s basically telling us that price is going to continue on up to the upsides, you can see that this candle came in and prices likely to continue on up to the upside, or if you want it to break this right here, the zone right here.
You see this candle right here, that broke through that zone, that would also be another good spot that you could get in and price continued on to the upside.
Okay, so these are the kinds of things that you’re looking for as a price action trader.
Okay, Now what other things are we looking for? Well, let’s just continue here. We see that price is clearly in an uptrend.
What happened here?
Price went from a trending phase to a ranging phase trending phase. Now it’s really in this ranging phase right here.
Right? And we can see that price has kind of hit off these bottoms here a couple of times.
And so this would be considered a support area, well, what do we see?
We see a big momentum candle, that’s great, this is a Morningstar that’s coming up here, which is another candlestick pattern, which you can learn in that cheat sheet.
As well as you see this momentum coming off and then price really try to dip into the zone here with this long wick candle.
And what do you see happen?
Price just flew right after that, right? Because price said, I want to come down there. Nope, I don’t, And then it flew up right, there you go, Now let’s actually talk about the specific strategy that I was telling you.
Here’s a simple price action strategy that you can use in your trading.
Okay.
So I’m going to go ahead and I’m going to pull up this chart here and I’m going to just show you what I’m talking about.
Now, this may look confusing to you, this is a price action trading indicator that Blue Edge Financial team built, it’s called the bank secret indicator.
You may have heard me talk about it before you don’t need to use this, but it’s just going to make your life a lot easier. And basically it’s going to take price, action, trading patterns and strategies, and it’s going to put it into an indicator.
Just make it easier for you to save you, time is basically what it’s doing, so let’s take a look at this here, for example.
So we see that price is in a downtrend, right?
We can see on the H one it’s down, because it’s red “H” four “D” one, all red. That means that it’s in a downtrend. So we only want to be looking for sell trades in the scenario.
We also see one thing that I like to look at is the sentiment indicator in forex there’s, two market participants or really in any market for the most part.
There’s the smart money and there’s the herd or the retail traders, and as we know, the herd is almost always wrong. And the smart money is almost always right.
And as you can see here, The herd is 78% long.
So we want to be opposite or we want to be contrarian or contract crowd, if we see that they’re long, we want to be short.
Okay, so again, confirmation, we want to be short, these zones here are support and resistance zones that are already painted on.
So just makes your life a little bit easier, and then what do we want?
Okay.
We see price coming up to this zone and then we’re waiting for some momentum coming on downwards.
Okay, So we can see here, Price started coming on down, you can see that we had a couple of decent sized candles here and you can get on down here.
Now, one other thing that’s cool about the bank secret indicator is you can program, this are just basically input settings where you say, Hey, I only want to trade with the trend.
Now I’m going to trade, contra-crowd, and I want to wait for say a bullish or bearish engulfing candle, and it’ll actually send you an alert straight to your phone.
So it’s really great.
Okay, so let’s continue on here. We saw price break on down here to the side.
Okay, let’s take a look at, uh, let’s take a look at this, for example, we see that this is clearly in an uptrend right here, we can see that price is in uptrend.
Look at all these blue bars and all these different time zones, we see that the herd is mostly short.
So we obviously want to be long again, and we see that price has come down to this support area basically as pulled back.
So what are we looking for?
We’re looking for some sort of engulfing candle, we can see, we got one right here, now, if you had programmed the alerts or input, the alerts, you would have got this push notification, right.
To your phone and then boom, what do we see that price is continuing on up to the upside, which is really, really nice.
Okay, which is exactly how we’d want it to play out, Okay, let’s take a look again.
Here, we can take a look, basically we see that price is in a downtrend, pretty clear, we can see that it’s down on all timeframes. We can see that the herd is 82% long.
We’re going to be contrarian, and we see that we have this resistance zone up here, and essentially, basically what we want to do is wait for some sort of candlestick pattern to come off of the zone.
We can see we got one right here, if you put in the inputs into the bank, secret indicator to alert you right when this happened and then boom, we see price fall down really, really nicely and really sharply.
Okay, so that’s essentially it, now, what could you do?
Okay, so there’s one thing they(Blue Edge Financial team)basically analyzed over 40 million retail trades and they found out that there’s one thing that profitable traders do.
If you are looking to find a suitable forex broker, be sure to read the following guides:
10 Best Forex Brokers That Give The Most Value To Traders
9 Best Forex Brokers That Are Recommended For Day Trading
9 Best Forex Brokers That Are Recommended For Scalping
My reviews about the best forex brokers in the world that offer the most value and facilities to traders.
Read About:
IRONFX Review BLACKBULL MARKETS Review
XM Review PUPRIME Review
INSTAFOREX Review TRADEVIEW MARKETS Review
VANTAGE Review SUPERFOREX Review
INFINOX Review AVATRADE Review
EIGHTCAP Review
Final words
Price action trading has a plethora of theories and systems that promise high success rates, but traders should be cautious of survivorship bias, as only success stories reach the news. Trading has the potential to generate substantial gains.
Individual traders are responsible for fully understanding, testing, selecting, deciding, and acting on what fits the criteria for the best possible profit chances.
And this tool actually give you 300% higher likelihood of becoming a profitable forex trader, if you simply do this one thing, okay, I’m going to include a tutorial right here as soon, which is going to include basically.
If you found this tutorial helpful, go ahead and click subscribe bell, so you don’t miss any other helpful tutorial as well and Allow the post notifications. But go ahead and read this article right now, it’s going to blow your mind.
I promise you.
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