Price Action in trading
Each trader chooses his own method of market analysis and trading strategy. Moreover, there is plenty to choose from. One of them is used by many traders - this is Price Action . The simplicity and versatility of this method is the reason for its popularity. Price Action is understandable even for novice traders. It does not require the use of any indicators or advisors.
The essence of the method is that the trader evaluates the candles on the chart and their patterns, and based on this makes trading decisions.
However, price action trading is not successful for all traders. This is because for effective trading it is necessary to know and take into account some of the nuances associated with Price Action. Today I want to tell you about them.
Maximum and minimum
When trading using the Price Action method , you should pay attention to the highs and lows that candlesticks form. If we see that the price breaks the nearest maximum on an uptrend, but does it with difficulty, then this should alert. Perhaps the growth momentum has already weakened and the trend is ending. It would be unreasonable to open buy deals in such a situation. The same is true for a downtrend. Only here it is necessary to look at the formation of a new minimum.
Support and resistance
When tracking the formation of candlestick patterns, you need to pay attention to where the important levels of both support and resistance are. If, for example, a model signals the continuation of an uptrend, but it formed near a strong resistance level, then you should not rush to buy. You need to watch what will happen on the market next. If the level was broken, then you need to wait for the breakout confirmation.
Candle bodies and shadows
In the process of trading, you should pay attention to the size of the body and the length of the candlestick shadows. If we see that several candles in a row have formed with small bodies and long shadows on both sides, this usually indicates uncertainty in the market. In such a situation, it is better to refuse to make any trading decisions.
The formation of a long upper candlestick shadow on an upward movement may indicate an increase in bearish pressure and a possible trend change. Formation of a long lower shadow at the candlestick on a downtrend indicates weakening bears and increasing bullish pressure.
Large candlestick bodies with small shadows confirm the current trend. Deals should be opened in its direction.
The Price Action trading method can allow a trader to earn consistently. But for this it is not enough just to know its basic models. It is necessary to carefully observe what is happening on the graph and take into account important additional factors.