PRICE ACTION

PRICE ACTION

What is Price Action?

Very basically, Price Action is everything that traders are doing and how they are behaving placed onto a chart for others to analyze.  Price Action is everything that price is doing and has done on a Forex pair or trading instrument for a trader to see on a chart. All price represents on a chart is what traders have done and how they have behaved given a certain situation. For example price gets to a support area and price bounces higher. This is traders buying up at a level in the market where they think support is.

Another example of price action at work on a chart is a Pin Bar. Price gets to a certain level in the market before rejecting that level and snapping back the other way. On a chart we see a Pin Bar but that Pin Bar was made up of traders all around the world buying or selling at the same area and rejecting higher or lower prices.  This is a method that has been around for a long time and will be around for a long time to come. Unlike other rubbish indicators or black box systems Price Action trading does not stop working when the market dynamics change.

How can we use Price Action to profit?

Traders and humans are very habitual and will do the same given the same circumstances. As traders we can begin to recognize patterns that form on the chart. These patterns will tend to repeat themselves and have the same outcomes. No two trades will ever be the same and no outcomes will ever match a previous trade’s, but by perfecting these high probability price action patterns we can begin to place trades that over time will give us an edge in the market!

Traders can learn and perfect these trading patterns and begin to implement strategies that will over time give them an edge on the market. An edge is simply something that gives a trader a better chance than 50/50 of placing a winning trade.