Dec 16 2019 0
A popular trading strategy nowadays among traders is Price Action Trading Strategy (or PA for short). Price Action is simply a trading system based on price action, i.e. the basis and movement of instant prices to find trading opportunities.
Price action trading strategy
Price Action is defined quite simply. Price means price, Action means action, so Price Action is an action of prices, often referred to as price action, too simple, isn't it.
If in real life all the phenomena happening around us have a cause. In the financial market in general, the foreign exchange market in particular, all financial markets create data on the movement of market prices in different time periods; This data is displayed on the price chart, and all have the cause of these price actions.
A chart showing instant prices reflects the beliefs and actions of all participants, often called traders, trading a market for a certain period of time and these beliefs are described above. The market price chart in the form of "price action" (PA). Since then the term Price Action was born.
However, although economic data and other global news events will have an impact, whether directly or indirectly, on price movements in the market, we do not try to explain too much about the formation. of their price action. Because the reason is quite simple, all world economic data and news causing price volatility in a market are reflected through price action on the market price chart.
And since then, price action has evolved into a gradual complete system, reflecting all the changes affecting the market over a given period of time.
And later with the advancement of technology, forex indicators were gradually formed to serve this price action, but these same indicators had a certain lag, so the use of Price indicators such as MACD, RSI, Stochastic, etc. and other indicators gradually become obsolete, just a waste of time because they do not catch up with the instant changing prices of the market.
There is a fact that:
And besides that a price movement provides all the signals you will need to develop a highly profitable and sustainable trading system, in addition to these general signals called strategies. Price action trading and they provide some of the market price trends and help predict its future movements with sufficient accuracy to provide you with a high probability trading strategy. That is how the price action trading system was born, and is increasingly improved to this day, favored by many technical traders, even very revered.'
Pros and cons of the price action trading strategy
Here are the pros of this forex trading strategy:
- It is an easy to learn, readily available and well documented trading strategy.
- Price action strategy makes your trading simpler.
- It helps you to react quickly and promptly to price movements in the market.
And here are the cons of the Price Action strategy:
- Price action strategies are often subjective in nature.
- Probability of risk is inevitable.
How to apply the price action trading strategy effectively?
To apply well the Price Action trading system, you should first note the following forex trading tips:
Keep your charts clean
Keep your MT4 chart as clean as possible, or if needed just one with some of the most popular forex indicators on it. Here’s a chart that has too many indicators:
However, if you need to use indicators, then we need to show the index of the index that you actually have to leave some places on the chart to have the indicators at the bottom, this will help you not to get tangled but can still look at my favorite indicators.
In the second example is the chart below, for example in the EUR/USD currency pair, daily frames do not use any technical indicators. And now let's see.
And now if you really look at both the above example charts and try to think about which one is easier to analyze and trade, the answer will be quite obvious that you can analyze. That's the second chart, right.
A wise trader will never let his graph be so confusing that he cannot see his own chart.
In case you're interested:
Apply when there’s a clear market trend
The trend of the market is extremely important, we can say it is one of the most important aspects of the price action trading school. If we know how to identify a market trend. Then trading on price action after that will be very easy for traders. As the above example shows that the foreign exchange market with the EU currency pair is on the trend of increasing quite clearly, and the trading according to price action also depends on this upward trend. That means our orders are more inclined to Buy.
However, in reality, it is not so simple, in order to effectively trade price action, in addition to determining the trend, there are also support and resistance levels, ... it will help you trade much more efficiently.
Keep an eye on the news
Besides, the thing that I want to repeat many times, is that you follow the economic calendar on the major forex world news sites such as brokerreview.net, top6forexbrokers.net, or forexfactory.com... or on the best trading apps to keep up with market trends and watch out for dramatic changes in the short term, which has a high risk that can affect your trading. When you have done all the three things, you can apply the Price Action trading strategy very successfully.