Price Action Strategy.
So you have decided that you want to be a forex trader.
Let us ask you a question: what do think most people first learn when they start trading forex?
If you guessed indicators, well done!
Indicators are used by traders to predict movements in the forex market…
But are indicators better than using a price action strategy?
Popular indicators vs. price action strategy
Why do most forex traders insist on using indicators for extended periods of time?
It’s because they want to take shortcuts.
Most forex traders ― especially those who are unsuccessful ― are constantly searching for a magical, almost mythical, indicator that will help them get rich quick.
In the real world, it takes a long time ― with numerous setbacks and losses ― before profitable traders find which indicators work for them.
Mind you, some professional forex traders don’t use indicators. But those who do find success with indicators will be surprised to learn that their success had nothing to do with what they expected.
You will find that the indicator teaches you how to become a better trader, via your price action strategy ― not the other way around.
In other words, it won’t be the indicator making you money ― it will be your trading ability.
Why traders have problems with indicators
Forex traders who are learning to trade with indicators face many problems.
For starters, not all indicators help make you money.
In fact, most don’t…
It’s known that indicators make life more difficult for unprofitable forex traders.
Worse, the more the unprofitable trader becomes confused with indicators, the more he feels the need to use them…
Suddenly, the forex trader is totally dependent on indicators. And while the trader may win once or twice using his favourite indicator, eventually he/she will lose…
The logic is simple here.
Remember, if one indicator helped you make a winning decision, you will look for a new indicator until you find one that works.
With this kind of thinking, you will constantly be looking for a new and better indicator so you can find an easy way to ‘win’…and keep ‘winning’.
It’s easy to see why most forex traders lose in the markets…
Make life easier and start trading forex with a price action strategy…
Price action strategy overview
Price action has been in existence for hundreds of years.
Seasoned forex traders still use price action to trade to this very day.
To start, you should know by now that money is exchanged between players in the forex market.
There’s a winner and loser for each trade.
But what you might not know is that this exchange leaves a footprint…
The footprint, or money trail, made is a market’s price action.
If this footprint is plotted out on a price chart, patterns becomes visible.
Professional forex traders can see these patterns with ease.
With experience, they can see the patterns made on the price chart, such as when the price is going to change direction.
That’s the kind of forex trading you should aspire…
Trading systems using a price action strategy
Price action is vital to learn in order to become an elite forex trader. But, while a price action strategy isn’t the only way to make money in forex, it can help all forex traders spot levels where to buy and sell.
Remember, price movements in forex markets repeat all the time, especially since highly complicated algorithms ― mathematical machines ― battle it out in the market. If studied well, a price action strategy can help you predict upcoming price directions.
Using a price action strategy is quite common among professional forex traders.
Most of these traders have simple systems as well.
Now, price action may sound confusing…
But it’s simple.
There are straightforward rules to create a logical price action forex trading system.
Profiting from your price action strategy
A common problem for new traders is knowing what to trade and how to find a price action strategy.
Remember, simple is better…
Price action traders analyse charts to discover repeating patterns, so there’s really no issue in knowing what to trade. They search for major signals prior to entering forex trades, such as:
- Are there fake breaks in the price?
- Has there been a price trend?
- Has there been a range?
- Is the price trading near, or at, a key level of support or resistance?
- Has the price formed a reversal signal? Did it show that the market may potentially move in the opposite direction?
Forex traders who use a price action strategy look for major supply and demand levels on charts. These forex traders are also able to see whether prices will break out, or potentially move in the opposite direction. In other words, using a price action strategy, the best traders can make consistent profits in forex.
The best price action strategy in forex trading
Forex traders who use a price action strategy are constantly analysing the price to enter, as well as manage, their open trades. Some forex traders look at major candlestick trends to enter trades, for example. A candlestick chart shows the high, low, open, and closing prices of a security for a specific period of time.
The pin bar is a classic example of a candle stick pattern:
Guess which ‘candlestick’ is the pin bar?
If you guessed the ‘nose’ on the above chart, you would be correct.
Pin bars are reversal signals and often trend continuation signs:
Forex traders use pin bars to execute their trades…
As you become a more experienced forex trader, you can spot trend changes and continuations using pin bars. They are one of the most common price action tools that show trends. But, don’t forget, pin bars aren’t the only price action setup.
Other setups include:
- Inside bars
- Two-bar reversals
- Fake breaks
- Engulfing bars
The list goes on…
You should also know that price action setups aren’t fool-proof, especially pin bars. Just because you see a bullish pin bar, doesn’t mean that the trend is bullish or going to continue. If that was the case, every forex trader would be rich! You need lots of screen time to craft your price action trading art.
If you are going to trade pin bars, they should include the following:
- Opens and closes within the last bar
- Candlesticks with at least thrice the body length of the candle
- Long protruding noses from every single bar
Digging deeper into your price action strategy
Every pin bar is different.
Price action forex traders tend to use other things, besides looking at the last candle, to enter and exit trades. That doesn’t mean using indicators to assist your trading, mind you. In fact, as seen in the bullish chart above, I believe the best pin bars are traded if they follow the trend. They are also best traded if the price is at a major support and resistance levels.
Here are some other price action strategy setups worth looking into:
Remember, while the above trade setups are common, they might not work out all the time.
There’s far more to a price action strategy than simply reading the last candle or noticing a potential double top, especially on a minor timeframe chart. Successful forex traders read the entire chart, prior to entering and exiting trades. Remember, the price is either trending or consolidating. You need to learn the way price moves with, and within, a major trend or consolidation zone.
How do you learn?
Practice trading forex.
Forex trading using trends
Most forex traders want to trade in the same direction, but are worried the trend has gone too far.
It’s a mistake.
Remove your opinions.
You probably have heard the saying, ‘The trend is your friend.’
That said, you might not have heard the saying, ‘The trend is your friend until it bends.’
The key to a good price action strategy is, focus on trading what you see ― not what you think.
Most forex traders ― especially unsuccessful ones ― believe you always need to buy low and sell high.
Some of the best forex traders try to take some ‘meat out of the bone’. For example, if there’s a 10-cent price move, these traders would try to take 5-cents of that price move.
Remember, small gains add up!
The best of the best are looking for the easy trade setups.
Don’t make life difficult for yourself.
The key to forex trading
Trading done well is simple.
Remember, if you trade with trends, you will often find good trades.
The easiest way to make money is to trade with the trend.
Ironically, even though it’s not complicated, most traders tend to do otherwise.
It’s not hard to see why most traders fail.
Trading is boring if it requires discipline ― and lots of it.
Don’t trade trends which aren’t obvious. If you have to think about the trend for longer than a second, it’s probably not a trend. If the trends are obvious to you, they are obvious to every other forex trader as well.
That’s how you make money.
I can’t believe that I’m not charging for this forex course!
In all seriousness, trading the trend is straightforward. If the trend is difficult to identify, or you aren’t sure whether price is trending, you should give up on the trade. Put it in the ‘too hard’ basket.
There are lots of ways to help spot trend continuations and changes. In fact, this is where some momentum indicators actually become useful! But all you really need is the price action. You don’t need complicated systems ― again, make life simple for yourself.
Forex traders who use a price action strategy only need to learn how to read a chart to spot the trends and changes.
Levels of support and resistance
Finding the major support and resistance levels is vital for analysing the trend and your price action strategy.
Support and resistance levels are the key places of supply and demand. Every trader is looking for the supply and demand zones.
Try to see what everyone else is seeing.
Don’t look for minor support and resistance levels.
Look for the clear and obvious ones.
Remember, forex is the most popular market in the world.
Key support and resistance levels are well respected.
Even though you might find slightly different support and resistance levels to other forex traders, they are usually close together. If you see a potential area of supply and demand, chances are someone else is looking at the same thing.
Major support and resistance levels can be called the ‘money zones’ because some traders tend to buy support and sell into resistance.
Supply and demand levels
Forex prices are determined by supply and demand. For example, when we buy our groceries and other shopping items, the prices are set by supply and demand.
Let’s use bananas as an example…
There was a banana shortage in Australia in 2006. Cyclone Larry wiped out most of the banana crops, which are grown locally and not imported. Because of the shortage, the supply of bananas dropped like a rock, at the same time demand was increasing.
The net result?
Banana prices climbed sharply!
The banana shortage sent prices skyrocketing by 400–500% in Australia.
Banana prices rose from $2 to $11 per kilogram.
Supply and demand happens in every market. It sends prices both up and down. Oversupply of a particular resource, with a low number of buyers (demand), results in plunging prices.
It’s the same thing in forex.
Forex traders who use price action analyse support and resistance on their charts, to show the supply and demand. They look for major support and resistance levels to trade. That’s because price action forex traders want to trade around the key supply and demand levels.
The best forex traders pair support and resistance levels with the overall trend, as much as possible. For example, regarding the supply and demand levels, large money flows tend to enter trades around those areas within trends. Therefore, it’s useful to pair support and resistance levels with trends ― especially if they’re strong ― to have the best results.
Your ‘Start With Forex’ takeaway: Price action strategy
Remember, there are a million ways to make a million bucks trading forex.
But one of the best ways is using a price action strategy.
When using a price action strategy for forex trading, the trader is not relying on any magical or miraculous indicator. He uses his skills by plotting out price movement to determine the next move in the market. Remember, at the end of the day, large trading wins are achieved by studying the market.
Plug yourself into the market and notice the way price turns.
Does price slow down before it turns?
What happens if it speeds up?
If you’re going to choose an indicator, choose price action. People look at studying the market’s price action with indicators. But all indicators are derived from the price action. In others words, indicators are backward-looking.
The price action is a real-time, live, forward-looking indicator.
Your bonus ‘Start With Forex’ takeaway…
If you really want to boost your chances of winning as a forex trader, you should plot the support and resistance levels prior to taking a trade. As the price reaches your levels, build a system that shows high-probability setups to jump on opportunities.
Mind you, that doesn’t mean buying when price is around support or selling when price is around resistance…
You need more than that!
The best forex traders know where to execute, since they are looking for more information regarding price action, such as momentum, trend changes, breaks and formations, candlestick patterns…the list goes on.
If you take anything from this forex course, let it be this: Trading done correctly is simple.
Most good forex traders are price action traders.
They don’t have fancy charts, loaded with indictors. They make simple trades over and over. That’s how you can become a consistently profitable forex trader.
Remember, there’s a million ways to make a million bucks in the forex markets. So if you want a head start in forex trading, check out our approved products page for forex trading signals and systems to help kick start your trading. It’s useful using reputable trading signals to help you start trading forex.
Good signals will help you identify price action opportunities.
When you get confident at trading forex using signals, then you can do it yourself! (…so think of a signal provider as your forex trading coach).
If you want the best forex signals and trading systems, click here.
I hope that you enjoyed this free forex course.
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To your trading success,
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