There are many different strategies that traders can use to achieve success. Some traders prefer to use technical indicators, while others prefer to use fundamental analysis. Some traders even choose to use a combination of both. However, one group of traders focuses mainly on price action. These traders are called price action traders. The forex price action strategy is a trading strategy that relies on reading the price chart and making decisions based on recent past events on the chart. The goal of the price action trader is to make money by reading the market and finding high-probability setups that will lead to profitable trades on TradingView.
Price action traders are always looking for opportunities to trade in either direction, but they need a tool to help them identify where conditions might be ripe. This means considering all sorts of technical analysis tools like charts and trend lines as well as price bands; high/low swings at different points throughout history.
Why Use the Forex Price Action Strategy?
There are several reasons traders choose to use this strategy over others.
The main reason why many traders choose to trade with the forex price action strategy is to help them make better decisions. By reading the price chart, price action traders can get a good idea of what is happening in the market and make informed decisions based on that information. Others include:
Versatility
The beauty of forex price action is in its versatility. Not only can price action be used as a standalone strategy, but you can also combine it with other forms of technical and fundamental analysis to create a well-rounded approach.
Flexibility
Forex price action strategy is very flexible in that there is no “right” or “wrong” way to trade it; different traders will have various techniques and approaches that suit their style and personality. However, there are some common characteristics that successful forex price action traders tend to share:
• They focus on key levels in the market (support/resistance)
• They look for higher-probability setups (Pin Bars, Fakey’s, etc.)
• They don’t over-trade; they are patient and wait for their edge in the market to play out
• When entering a position, they have pre-planned exit strategies depending on how bullish or bearish they are feeling
Easy to learn
One of the main benefits of using the forex price action strategy is that it is relatively easy to learn. Therefore, this may be the best approach for you if you are starting out as a trader or lack the background knowledge to implement more advanced trading techniques.
Easy to use
Many traders find this strategy more relaxing than other strategies because they are not constantly staring at their computer screens looking for trade signals. Instead, individuals may do nothing and wait for high-probability setups to develop before making a trade. This can help you divert some of your attention from trading and onto other areas of your life.
How to Use the Forex Price Action Strategy
Now that we know why many traders choose this particular strategy, let’s look at how it works. Since price action strategy is based on recent market prices, technical analysis tools are taken into account based on the trader’s preference and strategy fit. When using this strategy, you will want to look for candlestick patterns or support and resistance levels that you can use as potential entry or exit points for your trades. The strategy is all about making decisions based on market patterns and Support & Resistance levels. These are two technical analysis tools that every trader should be familiar with.
Market Patterns
A market pattern is a repeating formation found on a price chart. The most common market patterns are head and shoulders, double tops and bottoms, triangles, and wedges. These patterns can give you important clues about where the market is headed.
Support & Resistance Levels
Support and resistance levels are horizontal price lines that indicate areas of resistance or support in the market. When the market is heading towards a resistance level, it might be challenging to break through and potentially reverse course. Similarly, it might be difficult to break through and bounce back up when the market is heading toward a support level.
One important thing to know when using this strategy is to always wait for confirmation before entering a trade. This means waiting for the candle to close before deciding, to help you avoid getting caught up in false breakouts or fakeouts.
Interpreting forex price action data
Price action trading is an open-minded approach that allows latitude for opinions while still adhering strictly to specific rules. Each trader brings their unique perspective, set of tools, practices, and knowledge of market behavior to the table. Hence, no two people will ever arrive at the same conclusion on a given price move. Therefore, forex price action trading is a systematic approach where traders are given the support of technical analysis tools and recent price history but are allowed the freedom to take trading positions according to their personal and psychological state.
Conclusion
The forex price action strategy is an excellent option for those who want to make better trading decisions. By focusing on what is happening on the chart, price action traders can know where the market is headed and make informed decisions accordingly. Always wait for confirmation before entering into a trade to avoid false breakouts or fakeouts.