Advantages of Trading With Price Action in the Forex Market
Advantages of Trading With Price Action in the Forex Market
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Home Page > Finance > Currency Trading > Advantages of Trading With Price Action in the Forex Market
Advantages of Trading With Price Action in the Forex Market
Posted: Apr 26, 2012 |Comments: 0
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What is Price Action?
When you hear traders talk about price action (PA for short), they are talking about the movement of the actual price on the chart itself. Basically a candle stick on the 1hour timeframe is going to give you 1 hour worth of PA data, a candle stick on the 4 hour will give you 4 hours of data and so on. The more PA data you have, the more accurate of a forecast you can make, so using this simple logic we are going to know a daily candle has more reliable PA data to work with than candles from lower time frames. Trading with PA is the ability to forecast the movements on the chart, simply by looking at this PA data. If you are able to spot particular PA setups or configurations, it will allow you to make an accurate forecast on where price wants to go.
Price Action Vs. Indicators
When traders place indicators like RSI, Stochastic, ADX etc. on their chart, a large majority won’t really understand how the indicator truly works. Most of the time, they are based off complex mathematical formulas that will draw lines on the chart for you, so why would you really want to trade with something you don’t understand? Guess what indicators use to create the lines on the screen that you see, you guessed it price action! So if indicators are using PA data in formula’s to display confusing lines on the chart, why not cut them out and go directly to the source. By cutting out indicators and working with the PA directly, you can have a better understanding about the trades you take and why you are taking them. You will be able to place trades with more confidence and have a more solid understanding on how the market works. The other draw down from indicator’s is that they lag, meaning they display data too slowly and you can miss out on moves. When you trade with price action, it will make you more aware as a trader with what is going on in the market, you will be able to spot patterns and position yourself in the market so you’re in on the move before it happens.
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Price Action Patterns
There is a mountain of PA setups that you can learn to trade with, the setups can be in the form of a single candlestick, a combination of 2 or 3, or even a large cluster of candlesticks. Price action setups can be simple and then others come in more exotic forms, I like to keep things simple when trading, but keeping things simple doesn’t mean less returns, in fact keeping PA simple has better results than trying to over complicate things. I know trading with the single/duel candlestick PA combos can be extremely profitable with the correct approach. When traded correctly, the right candlestick signals can offer huge reward potential for the small amount of risk you place and that is really the essence of how you make money in Forex, making sure your winners far out perform your losing trades and this is easily accomplished using simple PA methods.
How do I get started with Price Action Trading?
The first thing you need is a price chart, a price chart that presents well and is nice and clear for you to read off and work with. You don’t need any special charting tool or broker, you can work with price action as long as you have access to a price chart. The second thing you are going to need is some education, this may sound disheartening but Forex is a business and you must treat it like one. You wouldn’t start a business up with any prior education would you, imagine opening a car mechanic workshop but you had no idea how to fix cars, see how this spells disaster. As I mentioned earlier, keeping price action simple is the best approach, so fortunately you can learn how to trade with PA easily and quickly, anybody can do it!
At DnB Price Action we offer a price action Forex trading course that is extremely rich with high quality price action trading methods that are simple, yet powerful approaches to making money in the markets. If you have any questions feel free to use the contact us form on our web page, we will be happy to answer any of your questions.
Come check out our price action trading website http://www.dnbpriceaction.com, we are offering free price action chart analysis, you can even sign up to our newsletter to get the chart analysis sent to your email on a daily basis! If you have any questions feel free to use our contact us form and we will get back to you soon with an answer!
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About the Author:
Graham Blackmore & Pearce Dunford have a combined experience in the financial markets of over 15 years, specializing in Price Action trading, helping others achieve their financial goals through by passing on their knowledge of price action and how to apply this into the markets.
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