6 – What is Price action trading analysis ?

Price action trading involves current historical data and price movements of the past. Price action trading takes into account all technical analysis tools such as charts, trend lines, price bands, high and low swings, professional stages of support and resistance.

The trading tools and patterns noticed by the trader can be merely price bars, price bands, break-outs, trend-lines, or composite mixtures that consist of candlesticks, volatility, channels and so on.

Price action trading strategy is as well affected by the psychological and behavioral view of the particular trader. As a result, each trader will have a different interpretation of price action. A technical analysis of the 15 DMA that crosses over the 50 DMA will produce similar extended position from many traders.

Primarily, in price action trading, technical analysis tools with recent price history are used by traders freely to make personal decisions within a specific situation.

Those that mainly make use of price action to trade

Price action trading involves price forecast and assumption. Thus, it is used primarily by retail traders, speculating investors, and trading organizations that hire traders. Apart from trading forex, price action can be used to trade large collection of securities like equities, bonds, commodities, and derivatives.

How to use price action to trade forex: The steps involved

Nearly all experienced prize action traders use many options to recognize trading patterns, entry and exit levels, stop-losses and connected explanation. Making use of only one or many currency pairs may not provide enough trade possibilities. Some trade situations occur through the two-step procedure presented below:

The first step involves discovering the position such as the currency moving either in a bullish or bearish direction; experiencing channel range, breakout and so on.

At the second stage, when you have discovered the situation, you need to find the trading opportunities. For example, when a currency is moving in the bullish direction, the chances are that it may overshoot or retrace. This is entirely dependent on the individual trader and may vary from trader to trader even when it involves related circumstance.

How widespread is price action trading

It is better to make use of price action trading for short-to-medium term profit trades, rather than for long-term investments.

A lot of traders argue that the forex market follows a haphazard prototype and there is no distinct organized way to describe a strategy that will continuously be effective. Through merging technical analysis tools and the recent price history to discover trade openings according to each trader understanding, price action trading has much implication for the trading community.

Benefits