Price Action Trading: How Top Forex Traders Make 100k A Month Trading Forex

Trading Forex is Really hard But trust me if you know price action trading your trading style will totally change 

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Tools Used for Price Action Trading

Since price action trading relates to recent historical data and past price movements, all technical analysis tools like charts, trend lines, price bands, high and low swings, technical levels (of support, resistance and consolidation), etc. are taken into account as per the trader’s choice and strategy fit.

The tools and patterns observed by the trader can be simple price bars, price bands, break-outs, trend-lines, or complex combinations involving candlesticks, volatility, channels, etc.

Psychological and behavioral interpretations and subsequent actions, as decided by the trader, also make up an important aspect of price action trades. For e.g., no matter what happens, if a stock hovering at 580 crosses the personally-set psychological level of 600, then the trader may assume a further upward move to take a long position. Other traders may have an opposite view – once 600 is hit, they assume a price reversal and hence takes a short position.

Read Alos: Best Broker That Suit Price Action Trading

No two traders will interpret a certain price action in the same way, as each will have their own interpretation, defined rules and different behavioral understanding of it. On the other hand, a technical analysis scenario (like 15 DMA crossing over 50 DMA) will yield similar behavior and action (long position) from multiple traders.

In essence, price action trading is a systematic trading practice, aided by technical analysis tools and recent price history, where traders are free to take their own decisions within a given scenario to take trading positions, as per their subjective, behavioral and psychological state.

Who Uses Price Action Trading?

Since price action trading is an approach to price predictions and speculation, it is used by retail traders, speculators, arbitrageurs and even trading firms who employ traders. It can be used on a wide range of securities including equities, bonds, forex, commodities, derivatives, etc.

Price Action Trading Steps

Most experienced traders following price action trading keep multiple options for recognizing trading patterns, entry and exit levels, stop-losses and related observations. Having just one strategy on one (or multiple) stocks may not offer sufficient trading opportunities. Most scenarios involve a two-step process:1

Identifying a scenario: Like a stock price getting into a bull/bear phase, channel range, breakout, etc.

Within the scenario, identifying trading opportunities: Like once a stock is in bull run, is it likely to (a) overshoot or (b) retreat. This is a completely subjective choice and can vary from one trader to the other, even given the same identical scenario.

The Popularity of Price Action Trading

Price action trading is better suited for short-to-medium term limited profit trades, instead of long term investments.

Most traders believe that the market follows a random pattern and there is no clear systematic way to define a strategy that will always work. By combining the technical analysis tools with the recent price history to identify trade opportunities based on the trader’s own interpretation, price action trading has a lot of support in the trading community.

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Advantages include self-defined strategies offering flexibility to traders, applicability to multiple asset classes, easy use with any trading software, applications and trading portals and the possibility of easy backtesting of any identified strategy on past data. Most importantly, the traders feel in charge, as the strategy allows them to decide on their actions, instead of blindly following a set of rules.