Importance of Price Action Trading in Forex

Forex Trading in price action is a method of financial market speculation which relies on analyzing the movement of basic prices over time. Anything which influences the market and makes it move, from news and economic data to major players such as hedge funds and banks, is expressed on a price chart by the raw price action. There’s a lot of ways traders can take advantage of market-price action. Various types of technical analysis such as Supply and Demand, indicators, support, fib retracement, etc. It can be used as a way to define changing price behavior. It helps FX traders in periods of heightened uncertainty to search for trading opportunities.

A Market trader using price action strategies should aim to analyze the market in order to make informed trading decisions about current and probable price changes. The trader examines the relative size, shape, volume of the bars on a high-low open-close chart of bars or candlesticks chart, beginning as easy as with a single bar, but more frequently combined with chart patterns seen in broader technical analysis such as trend line and moving averages.

Price action is based on the naked market chart trading and using no indicators there are no momentum indicators such as the RSI or stochastic, no moving averages and no volatility indicators, you just look at the trade support & resistance chart and look at the open/high, low/lose on a bar. The reasoning is that the currency pair you are looking at represents all the dynamics and the opinion of all the market traders who’s trading the currency pair.

Trading in price action is usually the art of basing all of your trade decisions on price movement in the market graph. To trade this way you don’t need any metrics indicators to help you define your go-ahead in the form of zones and trends of support and resistance. This methodology for making trade decisions is focused on the fact that financial markets produce data about fluctuations in a market’s price for a certain period of time. The full data is then shown on price charts. In the end, price charts are used to show the trading participants’ behaviors and beliefs, which are ultimately reflected in the form of price action on a market price chart.

It is not always easy to make a good trade as a lot of factors have to be considered for one to make the right decision. Trying to be a genius and getting all this knowledge at your fingertips can do you far more harm. Some traders make the mistake of trading emotionally and the others find it difficult to be consistent in their decisions. If you want to make a good living trade in the forex markets, you need to be trade with good discipline in price action.