Price Action Scalping is a trading method that focuses on analyzing price action to find short-term trading opportunities in the market. This includes the classification of charts and trading based on price action. However, do not depend on technical indicators. First of all, let‘s answer “what is scalping” with Forex Trading in 1 minute!
How does price action trading work?
Every trader wants to be in control of his or her Forex trading strategy. However, in the Forex market, there is a diversity of analytical methods.
One of the popular methods is Price Action. So what really is Price Action and why does it attract so many people? To apply Price Action effectively, it is important to have a solid knowledge of how to read and understand price action on charts.
What is price action trading?
Price Action, or price action, is a method of market analysis based on analyzing price movements from time to time. It is simply based on the price fluctuations of a specific asset to make trading decisions.
Analyze the weaknesses and strengths of Price Action Scalping
” Price Action Scalping ” is a trading method that focuses on analyzing price charts. This article will help you understand the weaknesses and strengths of this method to apply it effectively in trading.
Strengths when trading by price action
- Quick profit: This is an important advantage that most traders can immediately recognize. The main goal is to take advantage of small fluctuations in the market to profit, with order holding times usually only a few minutes. Therefore, the result of the transaction, whether profit or loss, can be known immediately without having to wait for the following days. This method reflects the motto of some investors which is “play fast, win fast.”
- Many trading opportunities: Price Action Scalping gives you many opportunities to enter profitable orders. Because this method is usually only used on very short time frames like M1 or M5. It is not uncommon for a scalper to place dozens of orders per day. For traders following the “improvisation system” method, the number of transactions can be up to hundreds in a day. Especially when they see the price increase high, they sell and vice versa, when the price drops too low, they rush to buy
- Avoid being influenced by psychology: The advantage to price action in this case is that the majority of orders are opened and closed immediately after. Therefore, they do not need to look at the chart to know how the price is moving.
- Not greatly affected by news: During price action, the order holding time is short and the time to enter an order is usually when the market does not have too much strong news. Therefore, traders will not be affected when the market fluctuates strongly.
Weaknesses when trading by price action
If you only state the advantages without mentioning the disadvantages of price action, it is extremely flawed. The following disadvantages will help you consider more carefully if you want to become a scalper.
- High transaction costs: The nature of price action is to trade with short periods of time. Especially at a time when the market is not very volatile. So traders are required to place many trading orders. Yes, it is extremely important to understand the costs before trading Forex. This is like you need to understand the rules of the game before starting the match.
- Risk of loss if you do not set a stop loss: Scalpers often make the serious mistake of “earning firewood for 3 years and burning it in 1 hour”, especially when they enter orders with large volumes. The main reason is that they often do not set stop loss. Given that short-term trading does not require this. However, no matter what strategy or trading style you adopt, not setting a stop loss can result in losing all your capital or going out of pocket.
See more: Master the Forex “game” with Price action
Instructions on the steps to trade according to price action
To create an effective detailed price action strategy, you need to follow a basic trading process as follows:
Step 1: Choose your trading style
Yes, signals from Price Action Scalping usually appear infrequently, which makes this method more suitable for medium and long-term traders rather than swing traders. This requires patience and discipline in waiting for quality trading opportunities.
Step 2: Create a trading system
Yes, advance preparation is very important in building an effective trading system. Two important steps are choosing the type of asset to trade and determining the appropriate trading time frame. The asset type should be chosen based on factors such as supply-demand relationships and market conditions. At the same time, choosing a trading time frame such as H1, H4, D1 or W1 is also important, especially if you use the Price Action method, because these time frames often provide complete and accurate information for decision making. intend to trade.
Step 3: Trading strategy ideas
First, identify key support and resistance zones. Next, get to know the current price trend. Use price patterns to make trading decisions. Finally, execute buy/sell orders, set profit targets and stop losses.
Step 4: Control capital and limit risks
This is a very important step that must be taken throughout the process of building a trading system. It will decide on assets, trading volume, stop loss order level and profit target.
How to do effective price action scalping
What is Scalping?
This is a method of making small profits. What is ‘Scalping’ is simply trading on a regular basis by opening and closing multiple trades throughout the day.
Price Action Scalping is for investors. Traders who use price action take advantage of the constant market volatility. By quickly entering and exiting trades, generate profits in no time. In contrast, swing traders often use 4-hour or one-day charts and hold trades from a few hours to a few days. This depends on the timeframe used.
Both types of traders have their own advantages: those who use price action can quickly find more trading opportunities and faster moves. While swing traders can take advantage of long-term market trends.
Note when optimizing the price action scalping method
Price Action Scalping takes place over a very short period of time. Therefore, in order not to face the risk of large losses, scalpers should note:
Forex Pairs/Markets
In case you trade on higher timeframes like the daily charts. You can have a better overview of the market and the Forex pairs you are interested in. However, when taking price action, you need to evaluate more carefully. Especially, if you are trading in a market that tends to produce large fluctuations. Above all creates Gaps, which can be extremely dangerous trading conditions.
Major currency pairs, like EURUSD and AUDUSD, are often the best choice when trading on smaller time frames. This has to do with the fact that these pairs often have smaller spreads and are heavily traded. Furthermore, creating more trading opportunities in the short-term range.
Spread / Commissions
This can be a lot easier if you mark your levels on higher timeframes. This means you can trade Forex pairs with slightly higher spreads without worrying too much about affecting your profits or losses.
However, when trading on small time frames and using scalping, you are often looking for small profits. This means the spread you pay will have a greater impact on your profit or loss.
So you need to choose pairs with smaller spreads, such as major Forex pairs. At the same time, make sure you use major exchanges that offer you smaller spreads.
Stop loss/take profit
Your take profit and stop loss targets will have to be smaller when you trade on smaller time frames. However, if you apply correct money management, the actual amount you make or lose will still be the same as if you were trading on the daily or 4-hour chart.
Make sure you are trading the right position size and never over-trade.
Popular price action scalping analysis tools
Price Action Scalping is the observation and analysis of an asset’s price behavior on a chart without using technical indicators. Traders focus on reading candlestick patterns and price structures. Also, identify support and resistance levels to make trading decisions. Thereby, price action allows investors to see the interaction between buyers and sellers in the market.
Candlestick pattern
- Pin Bar: A candlestick pattern with a small body and long shadows on one or both sides. It represents the observation between buyer and seller.
- Inside Bar: A candlestick pattern where the entire range of the candle is within the range of the previous candle. This signifies market stability.
- Outside Bar: A candlestick pattern where the candle body extends beyond the previous candle’s range. We see that this expression is often accompanied by strong fluctuations.
Support and resistance when trading price action
- Support: The price level at which buyers usually appear and push the price up to prevent a decline
- Resistance: The price level at which sellers usually appear and push the price down, stopping the price increase
See more: Exness – Trade With The World’s Leading Broker Exness
Trading strategies in price action scalping
Applying price action is similar to trading with other Price Action strategies. However, once you apply it, you will feel like using it more to create quick and profitable transactions for yourself.
In very small time frames, trying to pick a market direction (up or down) will also have a lower probability of success
Momentum Break and re-test.
The first strategy is to take advantage of the breakout momentum. You then quickly go back to retesting the previous breakout level. When the price returns to the previous breakout level, the signals trigger price action A+. This helps us determine the trade entry point at the breakout level. An effective way to do this is to experiment with support/resistance levels.
The first step is to identify a key level on the larger timeframe. This increases the possibility of a price breakout.
Results can quickly shift to smaller timeframes. From there look for potential price action opportunities.
Pull-back reversal.
When price action reverses quickly on smaller time frames. Therefore, you still want to ensure that the levels you take your trades at are of high quality.
This can be made a lot easier if you mark your levels on higher timeframes. Then, use these levels to look for Price Action Scalping on smaller timeframes.
Conclude
In conclusion, Price Action Scalping is a trading method that focuses on price action analysis. From there, look for short-term trading opportunities in the market. To trading based on price action be effective, practice and patience are important. Please accompany Forex Trading so that trading will not be a difficult problem in the future!
FAQ
Why do people use Price Action Scalping?
Price Action Scalping helps traders focus on short-term fluctuations in the market. Especially take advantage of short-term trading opportunities to make profits.
What factors are there to consider when using Price Action Scalping?
Factors such as market structure, support and resistance, price patterns, and trading volume may be considered.
Does Price Action Scalping have any disadvantages?
Although Price Action Scalping can provide short-term trading opportunities. However, it also requires extreme concentration and can cause many failed trades due to short-term market fluctuations.
