Price Action in Forex
Price action in forex refers to the study of a financial assets price movement, focusing on pure price movements and removing noise from charts. It is a method of analysis that involves analyzing the pattern or character of how the price of a security behaves, typically in the short run. This approach is part of technical analysis and is used to trade trends, breakouts, and swings effectively.
Price action trading is a systematic trading strategy that allows traders to make their own decisions within a given scenario, based on their subjective analysis, behavioral assumptions, and psychological state. It can be used with a wide range of securities, including equities, bonds, forex, commodities, and derivatives. Price action trading is popular among forex traders due to the high liquidity of the forex market, making it easier to open and close positions quickly, and the markets tendency to experience smaller, more manageable price movements.
In essence, price action trading involves making all trading decisions from a stripped-down or "naked" price chart, without relying on lagging indicators, and identifying dynamic support and resistance areas and trends. It allows traders to feel in charge, as it enables them to decide on their actions instead of blindly following a set of rules.
To start price action trading, traders can follow these steps:
- Create an account or log in to a trading platform.
- Identify the market they want to trade.
- Analyze the price movements of the chosen market to attempt to predict future price movements.
Price action trading offers several advantages, including flexibility, applicability to multiple asset classes, easy use with any trading software, and the possibility of easy backtesting of any identified strategy on past data.
In conclusion, price action in forex is a valuable approach to trading that focuses on the movement of prices and allows traders to make informed decisions based on their analysis of price movements and market trends.
