lananh1001
Member
What is Price Action?
Price Action is an approach to trading based on a security's price movements. Price Action patterns generate entry and exit signals. The Price Action system is one of the methods of technical analysis and is very popular among traders.
Judging by the name of the approach, we can guess that the price action strategy analyzes price movements and a trading decision is made based only on the analysis of the price chart. How can you analyze price moves?
One of the ways to represent the price movements is the Japanese Candlestick chart. This approach suggests each candlestick should represent a particular period, for example, 1 hour. Price Action trading strategies can take into account only chart patterns or candlestick formations without any indicators. Or, they can apply price action indicators as supplementary tools.
Many day traders focus on price action trading strategies to quickly generate a profit over a short time frame. Timeframes of H4-D1 are used to analyze general trends. In a shorter timeframe, the amount of market noise increases due to random price moves. In rare cases, the price action method provides ideal entry points in shorter timeframes.
Why do Traders Use Price Action?
Analyzing the structures formed by Japanese Candlesticks, one can discover particular patterns that are repeated from time to time. These patterns, with the correct approach, can be used to your advantage – to make money in the financial market.
Forex Price Action strategies are distinguished by their reliability and do not require any technical indicators. Price Action in forex is a form of technical analysis as it doesn't consider fundamental factors, focusing on the price historical data. What sets Price Action apart from most forms of technical analysis is that it focuses on the relation of the current price of a trading instrument to its past performance rather than the values learned from the price history. Price Action takes into consideration the highs and lows of the price swings, trend lines, and support/resistance levels.
Advantages of Price Action:
Patterns are straightforward and simple to interpret for beginner traders;
Trading strategies do not usually require additional software (indicators);
Price Action patterns do not repaint as they are based on closing prices;
They represent solely the price movement without the interference of indicators;
Price Action patterns are highly efficient when trading at strong levels;
From a wide variety of patterns, a price action trader can choose the most suitable for a particular trading strategy ones.
Price Action in Forex
Price Action Forex strategies are suitable for medium and highly volatile assets, such as GBPUSD, EURUSD, and other major currency pairs. The Price Action trading system is also rather efficient in trading some major cross rates.
I don't recommend applying the Price Action patterns to trading minor cross rates or exotic currency pairs. Exotic currencies feature sharp unpredictable movements associated, for example, with the central bank's interference or economic sanctions against a particular country.
If you trade price action patterns in stocks, you had better choose highly liquid assets. Use a stock screener to select the shares based on the traded volume.
Price Action strategies in trading other instruments, such as cryptocurrencies or commodities, also have their particular features. The lower the liquidity for the instrument, the worse the Price Action patterns work out. It is necessary to follow the same recommendations and choose instruments with high liquidity. For example, for the BTCUSD pair, the Price Action method works perfectly, but for altcoins that are not in the TOP 100 by market cap, the method may fail.
Price Action is an approach to trading based on a security's price movements. Price Action patterns generate entry and exit signals. The Price Action system is one of the methods of technical analysis and is very popular among traders.
Judging by the name of the approach, we can guess that the price action strategy analyzes price movements and a trading decision is made based only on the analysis of the price chart. How can you analyze price moves?
One of the ways to represent the price movements is the Japanese Candlestick chart. This approach suggests each candlestick should represent a particular period, for example, 1 hour. Price Action trading strategies can take into account only chart patterns or candlestick formations without any indicators. Or, they can apply price action indicators as supplementary tools.
Many day traders focus on price action trading strategies to quickly generate a profit over a short time frame. Timeframes of H4-D1 are used to analyze general trends. In a shorter timeframe, the amount of market noise increases due to random price moves. In rare cases, the price action method provides ideal entry points in shorter timeframes.
Why do Traders Use Price Action?
Analyzing the structures formed by Japanese Candlesticks, one can discover particular patterns that are repeated from time to time. These patterns, with the correct approach, can be used to your advantage – to make money in the financial market.
Forex Price Action strategies are distinguished by their reliability and do not require any technical indicators. Price Action in forex is a form of technical analysis as it doesn't consider fundamental factors, focusing on the price historical data. What sets Price Action apart from most forms of technical analysis is that it focuses on the relation of the current price of a trading instrument to its past performance rather than the values learned from the price history. Price Action takes into consideration the highs and lows of the price swings, trend lines, and support/resistance levels.
Advantages of Price Action:
Patterns are straightforward and simple to interpret for beginner traders;
Trading strategies do not usually require additional software (indicators);
Price Action patterns do not repaint as they are based on closing prices;
They represent solely the price movement without the interference of indicators;
Price Action patterns are highly efficient when trading at strong levels;
From a wide variety of patterns, a price action trader can choose the most suitable for a particular trading strategy ones.
Price Action in Forex
Price Action Forex strategies are suitable for medium and highly volatile assets, such as GBPUSD, EURUSD, and other major currency pairs. The Price Action trading system is also rather efficient in trading some major cross rates.
I don't recommend applying the Price Action patterns to trading minor cross rates or exotic currency pairs. Exotic currencies feature sharp unpredictable movements associated, for example, with the central bank's interference or economic sanctions against a particular country.
If you trade price action patterns in stocks, you had better choose highly liquid assets. Use a stock screener to select the shares based on the traded volume.
Price Action strategies in trading other instruments, such as cryptocurrencies or commodities, also have their particular features. The lower the liquidity for the instrument, the worse the Price Action patterns work out. It is necessary to follow the same recommendations and choose instruments with high liquidity. For example, for the BTCUSD pair, the Price Action method works perfectly, but for altcoins that are not in the TOP 100 by market cap, the method may fail.
