Why is price action important for traders?

Why is price action important for traders?

May 31 • Forex Trading Articles • 537 Views • Comments Off on Why is price action important for traders?

Price action trading is an approach that involves making all your trading decisions based on a simple and easy to understand price chart. This purely means that there should be no lagging indicators used, just a couple of moving averages to indicate dynamic resistance and support areas.

Price action is about simplicity.

When a trader wants to enter the market, he/she does not require to compact his/her price chart with thousands of technical indicators, like oscillators, Fibonacci retracements, several moving averages, pivot points etc. Using such a complex approach of examining the chart eventually drains your energy and causes great stress. So, it is important to clear out your price chart from all technical indicators. These indicators often produce results that

Establishing your trading decisions on price action will allow you to trade in real-time, following the markets’ movement. When you depend upon the help of candles (bars) alone, you can understand what is currently happening in the market. Price action gives clarity, and clarity, ultimately, boosts your confidence when entering into a position.

Signals produced by price action are quite easy to detect.

Price action can easily be understood by someone ready to dedicate a certain amount of time to learn its basics ideas. For instance, a pin bar is a prime reversal signal, which allows you to assume how prices are most likely to move next.

If we observe a pin bar with a long upper shadow, it demonstrates that prices are not expected to move further to the upside due to the strong resistance that has been faced. A move to the downside is more likely to happen.

If we spot a pin bar with a long lower shadow, this demonstrates that prices are not expected to move further to the downside due to the strong support that has been present. A move to the upside is more likely to happen. Combining these hopeful and bearish price rejections with major resistance and support lines on the price chart produces a simple trading strategy.

Time frames on which you trade are of certain importance.

Some price action traders often prefer to use daily or weekly time frames, thinking of them as more reliable. This is so because one daily bar contains a significantly greater amount of data than one 5-minute bar. The more data we have, the more reliable signals are produced by the bar. These signals aid in having a successful trade.

Consistent gains in the currency market are obtained through a flexible trading method.

Either in a trading range or a strong trend, the Forex market is extremely strategic. If you want to take advantage of markets movement, you should rely only on price action strategies. No delay is present; either there is a candle setup, or simply, there is not.

Conclusion

Learning how to read and trade from price action will improve your overall growth and success rate. If you want to trade Forex efficaciously, knowing how to trade price action and how to use price action Forex trading indicators is mandatory. Do not betray yourself by believing you will somehow succeed in currency trading without proper knowledge of price action trading concepts.

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