Price Action Trading – Most Adaptable Forex Trading Method
Not able to understand complicated trade setups? Confused with indicators? If so, your search has finally come to an end – destination reached. In this article, I am going to present a very simple and easy trading strategy (or trading approach) that may allow you to earn consistent profits in a stress environment; the strategy is known as “Price Action Trading”.
What is Price Action Trading?
Before getting into the nitty gritty side of things – let’s take a quick look and actually figure out what Price Action even is. Price Action, well is exactly what it sounds like – it’s Price Action (the latest market moves and structure). In short, it’s the strategy used in generating simple yet precise Buy or Sell signals within the financial markets – and the best thing; it doesn’t even require indicators to work! Sounds interesting? Well let’s continue, you’re about to dive into major industry secrets! Read on.
Identification of Trend
If you’ve been trading for a while now then you must have heard this saying once or twice; “The Trend is your friend”, these four words as simple as they sound, are the pillars to a successful trading strategy. Generally speaking anytime you try to go against a trend, you end up taking the long way home, so to avoid that we always like to ride the wave which brings us to the ultimate questions of “how do I identify a trend?”, again there is no rocket science involved, no magic or secret indicator that will jump up and down and say Buy or Sell – to identify the trend we follow a very simple trend identification technique called ‘Wave analysis’ or ‘Swing Analysis’.
Nice uptrend moves.
Price tends to move in waves, the extreme upper level of a wave is called ‘high’ of the wave and the extreme lower level is known as ‘low’ of the wave. If a wave prints ‘higher high’ and ‘higher low’ as compared to high and low of the previous wave, then trend is known as ‘Bullish’ or ‘upward’. Similarly, if we see a ‘lower high’ and ‘lower low’, the trend is considered to be ‘downward’ or ‘Bearish’.
Every bullish trend is created by higher highs and higher lows.
Now if the trend is bullish, you should consider only buying opportunities (selling should be ignored whatever situation may be), likewise in bearish trend, your only option should be selling. Now the question arises, how to identify the entry and exit points of buying and selling?
Answer is again in the price action, not somewhere else. Entry and Exist points can be identified through;
To have a complete understanding of the Price Action strategies and other technical analysis tools, simply click at the links above that will redirect you to a given educational article, or go through our education in the Forex Live Trading Room.
Most of the beginner traders are not able to pick the right timeframe. Generally speaking, higher the timeframe, more accurate and reliable will be your analysis. However, with weekly or monthly timeframes, you will have to take relatively bigger risk because stop-loss needs to be bigger in weekly or monthly timeframes. It's usually wise to analyze trends in daily and above timeframes, and practice the right timing and make trade decisions based on intraday timeframes (hourly and below). But choosing the right timeframe might vary based on your exact trading strategy.
You do not need any rocket science to be a successful trader, just learn the price action trading, practice it for a while on a demo account and then trade with the real money. Always trade with discipline, revise your own rules and strategies and then stick to them; as trade gurus said “Plan your trade and then trade your plan”. Trading is simple, so keep it simple and begin your successful journey.
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
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