The article below will tell you What is Price Action in the financial world today. Join Forex Trading to explore this important aspect to clearly understand how price action moves and interacts on the chart.
What is Price Action? An Overview of Price Action
There is a lot of information to learn about What is Price Action? It is called price action, which is a method of market analysis based on the analysis of price movements over time (candles). Price action trading is simply using the price movements of a specific asset to make trading decisions.
Although it is a simple Forex trading method. But they are effective, especially in highly liquid and volatile markets.
Analyze the pros and cons of Price Action Trading
After clearly understanding price action, the next step is for traders to analyze the pros and cons. Because then it will help them have an overview of the Price Action trading method. From there, take advantage of the advantages in your strategy in the most thorough way.
What are Price Action advantages?
- Is an accessible trading method available with extensive documentation.
Through many years of development, this method has attracted most of the attention and trust of all traders. At the same time, a treasure trove of documents has been created over the years.
Besides, It is very easy to learn because you only need to look at the price chart without monitoring any other indicator tools. Charts are often provided for free on trading platforms. They allow you to start learning and practicing immediately.
- This is a method that makes your trading simple.
Usually, it is necessary to use sophisticated and diverse methods that we always use in trading because we think it is professional and highly accurate. However, the simpler it is, the more opportunity we have to recognize and participate in analyzing market psychology.
- It is a method to quickly and promptly reflect price fluctuations in the market.
Price action can help investors recognize opportunities sooner when a wave appears. This is the biggest advantage of this method with indicators. Because basically, indicators often have a certain lag compared to market fluctuations.
- It is a logical method that helps investors determine entry points, stop losses, and take profits accurately.
Thereby helping you predict the long-term trend of the market effectively.
Disadvantages of Price Action
- Trading based on price charts becomes subjective and depends on:
Because each trader uses different ways to determine resistance and support. Therefore, when trading, there will be many different subjective thoughts and ways of analyzing the market for each person.
- Risk probability is an ever-present problem :
The “sharks” often create ways to manipulate the market with fake price models, causing many investors to fall into the trap they set.
In short, remember that it’s all about probability and no investor can predict market trends with 100% accuracy. Action is just a method to help speed up the process to success, not the deciding factor in all of your success or failure.
Thus, to have a good method, investors need to manage capital. At the same time, develop better trading psychology to win more percentage of the market.
See more: Master the Forex “game” with Price action
What is Price Action trading process? Instructions for specific steps
There are many ways to learn effective trading strategies such as learning pull back meaning, what breakout trading is, etc. Therefore, to create an effective detailed trading strategy at Price Action needs to follow a transaction process as follows:
Identify the Price Action Trading style
Signals often appear infrequently, the frequency is quite rare. Choosing this method is often more suitable for medium or long-term traders than for scalping traders.
Create Price Action trades
To create this transaction includes 2 steps:
Firstly, choose the type of trading asset. Every type of asset is affected by the supply and demand relationship. Or the relationships between the buyer and the seller are suitable for this transaction method.
Second, determine the trading time frame. Large time frames such as H1, H4, D1, or W1 are often favored when applied with the Price Action method. It is important to monitor the price fluctuation chart to capture the right time to place an order.
Build Price Action trades
What is Price Action the way to build a Price Action transaction? It is necessary to identify important support and resistance areas on price charts. Along with that, you should also identify the highest and lowest prices of the year. Then, you need to determine the current trend of price fluctuations, and identify price patterns to make trading decisions. Finally, investors can go to the step of placing orders, taking profits, and cutting losses.
Capital management for Trader Price Action
This must be done continuously during the process of building the trading system. This is an extremely important step, affecting your trading capital, trading volume, stop loss level,…
What are the conditions for becoming a successful Price Action Trader?
Every trader from beginner to professional can trade price action. However, being successful is not easy. It requires traders to ensure the following conditions:
Understand what Price Action is and master the basics
If you want to pursue the Price Action trading style, you should start with the basic knowledge and its tools.
Specifically, traders must know how to identify important resistance and support zones. Not only that, you also have to understand the meaning of each candle as well as grasp the characteristics and how to identify each candlestick pattern such as candlestick continuation pattern, Japanese candlestick patterns, price patterns… Besides, there are How to trade with each model. Next, practice trading a lot using a Demo account. Practice until you win many orders in a row before switching to trading with real money.
See more: Optimize trading with IC Markets Exchange
Removed Price Action indicator
Remove the indicator from the chart if you decide to apply this trading method. It will help traders focus more on observing and analyzing charts. No longer depend on certain indicators.
Practice Price Action Trading
Start building a trading strategy with Price Action and practice daily. Regularly view charts and use Backtest/Forwardtest to improve and hone your trading skills.
Conclude:
So, Forex Trading has told you What is Price Action. It is a simple trading method but very difficult to access. Because this method largely depends on the ability of each trader. Therefore, if you want to pursue this trading style, really understand the tools used and improve your knowledge to have a smooth transaction.
FAQs
What are effective Price Action Trading strategies?
- Pullback trading
- Follow the reversal strategy
- Follow the Breakout strategy
What are the 3 main types of pricing models?
These are the continuation price model, the bullish price reversal model, and the bearish price reversal model.
What main tools are used in Price Action?
There are 3 main tools used: resistance/support lines, price patterns, and candlestick patterns. These tools aid in analyzing price behavior and help determine which side is dominant in the market.
