price action trading strategy

The word "price action strategy" is a general term used to describe trading strategies. You can think of price action strategy as a category in basic trading strategies, indicator based trading strategies, and high frequency trading strategies. In this case, the focus of the trading strategy is on price, which is the most important driving force of the market.

Define price action trading strategy

Price action strategy is the study of the historical movement of the market to see how traders behave at a certain time with a certain movement, and it depends mainly on Japanese candles in addition to some other technical models.

The strength of the price action trading strategy lies in the analysis of the information that forms the basis of trading and that the decisions of traders are repeated in the future based on past events.

In price action trading strategies, the information you infer from the market is reflected in the price.

In fact, this is the basis of most technical analysis, as although fundamental technicians may look at EU economic data as the basis for trading the Euro, price action strategists will only look at what the market is doing and assume that the market knows what it is doing. In the end, it doesn't matter what the market "should" do, what matters is what they really do.


Price action trading strategy requirements

There is no need for technical indicators for this strategy, all you need to know is the shape and method of the hammer candle that is appearing in a downtrend, and showing a reversal in the near future, which indicates that the sellers do not have enough strength to maintain the trend.

Time frame used in price action strategy

This strategy can be used for any period ranging from minutes to months, but to be honest, this strategy is not very effective in the short term, so it is recommended to use it in a long time frame.


Supply and demand zones in price action strategy

In technical analysis, the most important analytical factors are the level of support and resistance.

In the movement of price  the zone of supply and demand level, where supply and demand regulate price fluctuations.

A supply and demand zone is a limited price range where the price quotations have changed direction or started to move strongly.

The supply and demand areas play the most important role for the traders as they always provide the best entry points with the beneficial risks for the potential rate of return, the longer the chart period, the more important the supply and demand areas on the chart.


Price action trading strategy rules

The rules of the price action strategy are broken down into steps to make it easier to understand:

Finding the Hammer Candle:

The first step in a price action strategy is to find the hammer on which the strategy is based, but keep in mind that this candle should be in a downtrend rather than an uptrend.

Entering a buy position:

A hammer candle indicates a weakness in the strength of the seller who needs the price to change direction, but not on condition that the change of trend is a correction.

And we are waiting for a confirmation signal from the next candle to prevent more losses, which when it closes, its body is higher than its lower shadow.

Setting a stop loss order:

Determining the stop loss order is very important, as it can be placed below the hammer candle, and therefore, breaking this limit to the minimum means the failure of the correction or the bullish trend.

select the target :

There are several methods to determine the profit order in the price action strategy, which is directly related to your evaluation, and one of these methods is to close the position after two candles from the entry point and then only make the profit.

Some transactions remain open and not closed unless there is a signal indicating the end or weakness of the current corrective movement, and the use of support is also available, but this is due to the evaluation and experience of traders in the market.

We advise beginners to use the first method.


Ownership of information by deliberative institutions

One of the main reasons to talk about price behavior strategies is that trading institutions have access to information more quickly and accurately than you, you don't have a team of statisticians working on the latest forex market trading algorithms nor a team of economists that provides insight into the behaviors and underlying possibilities of price movements market.

Chasing the price enables you to skip the block that may be blocking your move.

This is a price action trading point. This makes it more market-neutral.

After all, we are not in the market sitting in front of computers all day but to make a profit and reduce stress.

Paradoxically for trading experts,trading causes a lot of stress that is the result of personal thinking.

When you stop worrying about trading in the financial markets, you start to focus on what is really happening in the market, and trading becomes simpler than it used to be.


Price action is a popular and effective trading method that uses many trading styles.

It should be noted that price action is not just a trading pattern, but rather a complex set of elements such as supply and demand zones, demand levels, Fibonacci levels, and trading patterns.

Tags : trading strategyforexforex tradingwealth