Price Action Trading Strategies: How it Works for Maximum Success Improved
Price action trading strategies are a way of trading used by technical analysts asides from the use of indicators.
Have you ever tried trading the financial markets without using indicators?
Indicators lag and many traders do not like using indicators thereby they use naked trading as a skill for their profession.
Some traders believe in using what they call price action indicator
The RSI and Stochastic are used as indicators that follow the exact pattern of the price of the market.
However, I am here to teach you trading without using indicators in this post.
Price action patterns are history-based, hence price action is the king of the financial markets.
Do you trade stocks, forex, cryptocurrency, indices, and commodities?
If yes, then you need to understand price action strategies.
Price Action Trading Strategies in forex
Price action trading is a way of trading whereby a trader only uses the movement of market price to buy or sell an asset.
Price always moves with key levels of support and resistance, a demand and supply zone, and trends movement.
This style of trading using price action is simple and effective for both beginners and intermediates.
Price action trading strategies are used by forex traders. They use momentum, trend, and candlestick patterns to predict price movements.
This could be your first time reading about how to trade without using indicators but it’s pretty simple and I promise you, you will learn this with ease.
I want to major this post on using price action to trade forex but this principle can also be used to trade cryptocurrencies, indices, and commodities.
What is Price Action Trading Strategies in Forex?
Price Action in forex trading is about patiently reading and studying the exact movement of market price and taking action by buying or selling only at a confirmed point.
Price Action Trading Entry and Exit Strategy
I will be explaining how you can buy or sell an asset with this price action principle. The purpose of price action is to trade an asset in the short term before the market moves.
Trading with a price action strategy gives you a better view of the market structure, when to enter a trade, and when to exit a trade. Price action trading strategies reduce risk.
Candlestick patterns are used to better understand price action.
The basic 3 steps to price action strategies are explained below.
Price Action Trading Using Support and Resistance Levels
A support level is a horizontal level on price charts where buyers push the price market high. A support level is treated as a zone. Read the previous post on support and resistance.
The resistance level is a horizontal level on a price chart where sellers push the market price lower. The resistance level is seen as exhaustion from buyers when most buyers pulled out of the market.
Support and resistance can interchange as the market makes diverse movements up and down the chart.
Support can become resistance and resistance can also become support. When the support level breaks, the level becomes a resistance, and when the resistance level breaks it becomes support interchangeably.
Candlestick patterns are used accurately at these support and resistance levels to have a massive profit and a minimum risk.
Price Action Trading Using Trendline
Trendlines are upwards and downwards lines drawn across a price chart in an uptrend and downtrend accordingly.
Obvious troughs and peaks of the price charts are used to draw trendlines.
The longer the trendline is respected by the price the stronger the trend.
A minimum of two peaks ( or highs) are connected with a line from left to right and a downward trendline is drawn.
You should have a minimum of two troughs ( or lows) connected with a line and an uptrend trendline is drawn.
I have also explained how to draw trendlines in my previous post.
Price Action Trading triggers
The knowledge of the above two patterns is used with market structure and candlestick pattern.
Market structure determines whether the market price is in an uptrend, downtrend, or ranging.
You only look to buy in an uptrend and never go against the trend.
Is the price bouncing on and off support and resistance, thereby indicating a ranging market?
So, you only buy at support and sell at resistance.
Price is in an uptrend, making contact with the trendline and immediately bouncing off it
Then you buy at the next touch to the trendline in an uptrend and sell at the next touch to the trendline in a downtrend.
Before buying or selling at these unique spots, some candlestick patterns are used as trade triggers to determine good entry and exit positions.
Let the candlestick patterns be your price action entry rules and price action exit rules.
Hammer, shooting star, bullish engulfing pattern, and many others will help guide you through these price action trading. You will ride breakouts and know the false breakouts with this trading skill.
I’d like you to put what you’ve learned from price action trading strategies into practice on a demo account. The strategies listed above are the ultimate price action trading guide.
Learning these strategies will transform you into a pro and increase your chances of making a good living from trading. Do you want to figure out how to make money trading with candlestick charts?