Many forex trading strategies have been invented over the years. While some depend on the technical use of charts and numbers, others depend on a fundamental understanding of the market as regards the current events. However, some strategies have become more popular as they are used by the majority of the traders, while others are not so popular. Let us now discuss one of these trading strategies – price action strategy.
PRICE ACTION STRATEGY:
Price action strategy in forex market is simply the technique that involves assessing and reading the market in order to make decisions based on the actual movement of price on the charts rather than a mere dependence on lagging indicators. Since most indicators are gotten from the actual prices on the chart, they are, as a matter of fact, merely giving information on previous price movements.
It is not rational to anchor one's trading on past information when the important question in trading is the question of what prices are good to trade with at the moment. At the same time considering what those prices are most likely to do in the nearest future. The use of certain strategies would help one to learn and know what prices are mostly likely going to do in the nearest future, instead of just trying to do a guess work using lagging and misleading indicators.
Price action, in a more technical term, is the movement of a security's price. The action is designed in technical and chart pattern analysis which tries to seek orderly pattern in the movement of price which sometimes appear to be in a random flow.
Some of the examples of price action include swing (comprising of high and low), tests of resistance and consolidation. The important tools for analysing price action are candlestick and price bar. They help traders to visualise the price movements. Candlestick pattern such as the Harami, engulfing pattern and cross are all examples of visually interpreted action price.
In price action, there is a group of traders known as price action traders. These are technical traders who depend on technical analysis but do not depend on conventional indicators to direct them while trading. Thus, everything that one needs to know about where prices are going is directly embedded in price action. Sadly, many traders will never get to see this because they are too busy looking for the easy way out. They try to find trade system that only depends on lagging indicators. They prefer the indicators making their trading decisions for them. But when it comes to price action technique, more intuitive thinking is involved. If one learns to read and understand the language of price action, then he has no need for the indicators. The person will, in no time, learn to trade with nothing more than a simple chart, and his trade will be highly profitable. Thus, price action strategy requires knowledge of support and resisting lines, breakout points, and repeated patterns in price. This very last is mostly important.
Using price action strategy to make trading decisions instead of using indicators, make one an indicator automatically. The only thing is that it takes time for one to get used to this technique since about 99% of traders are used to covering the charts with unnecessary indicators.
One does not need a fancy trading station with many monitors, neither does one need any expensive nor overused indicators that are capable of misleading one into bad trades.
In conclusion, one does not have to dive into forex trade uninformed. Self education on price action strategy is necessary so one can make good analytical and rational question in his trading. Also, price action may take quite a while to practise before a trader could actually determine what works. So, even though and free, there is still a price to pay-patience.
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