A Basic Rule of Price Action Trading

A Basic Rule of Price Action Trading
A Basic Rule of Price Action Trading img by : tickertape.tdameritrade

Sangkolan.com – A Basic Rule of Price Action Trading – What is Price Action? Price Action is the art of making trading decisions based on reading price movements on charts. This can be done without indicators. The only thing that should be on the chart is your support and resistance levels.

Now remember that by the word “action” in Price Action we mean price action on a specific chart. Remember that each chart tells the story of a battle between bulls (buyers) and bears (sellers). It is that each chart (Forex or vice versa) shows that price action is influenced by the fact that traders make trading decisions. (manual or automatic)

Price action shows the latest market sentiment. Because it is happening right in front of your eyes! The use of indicators tends to lag behind. Therefore, sometimes you enter an indicator trade in the hope that it will be successful. Just to give you a price otherwise! (Don’t enter a trade “expecting” it to go well. We look for high probability trades – low risk trades that are reasonable to execute!)

Price Action = Trading the CAUSE

When I realized this, it was the moment when I realized that money was falling. I was trading the result of the price movement. This is why I am inconsistent. Trading this way means I can trade the reasons for price movements and get into potential moves early.

How to Trade Price Action

Price action trading has four main components:

  1. Fundamental analysis
  2. Technical analysis
  3. support and resistance
  4. Candlestick analysis

At first glance, this may seem overwhelming. But once you understand these elements, you will see that they are very easy to make.

Let’s take a closer look at these four elements:

1.Fundamental Analysis

It is very important. Always follow the global economic news. Remember, we trade Forex, foreign exchange. We trade currency pairs. There will be some global economic news that will affect the price movement.

2.  Technical Analysis

Technical analysis at Price Action Trading recognizes certain patterns on the chart that may indicate a potential trade. Remember graphs are subjective. The reason they move this way is that traders make trading decisions.

Traders will look at the chart and see that historically the price has deviated sharply from a certain area. Now the price has reached the same area and expects the same to happen. As humans, we tend to look for patterns and similarities.

Therefore, technical analysis is very important for understanding and identifying potential trades. We look for potential trades in areas of support and resistance.

3. Support and Resistance

Support and resistance are areas on the chart that we believe are filled with buyers (at support) and sellers (at resistance). This is our commercial opportunity. Because this is the highest probability – the trade with the lowest risk. This brings us to the last piece of the puzzle. candlestick analysis

4.  Candlestick Analysis

candlestick analysis As the name suggests, this is candlestick analysis. We create these candlesticks one by one to keep abreast of the latest developments. the most up-to-date and therefore the most accurate market sentiment. This is why trading on higher time frames is key. Because it shows us a more lasting price action. If you have two candles, a 5 minute candle and a 12 hour candle, the 12 hour candle is more important because it represents a longer period of price movement.

This way you will know the basics of Price Action, learn it, master it and continue to make profits.

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