Price Action Strategy
Price Action is a trading technique that allows traders to read the market. Traders are also required to make subjective trading decisions based on current and actual price movements, instead of relying solely on technical indicators. This trading strategy relies on technical analysis tools. Thus, traders ignore fundamental analysis factors and focus more on current and previous price movements. Many short-term traders rely heavily on price action. In addition, many day traders focus on price action strategies to make profits in the short term. For example, traders look for simple breakouts from session highs, enter long positions, and use strict money management strategies to make a profit.
Tools Used For Price Action Strategy
Since trading using this strategy is concerned with recent historical data and past price movements, all technical analysis tools such as charts, trend lines, etc. are used to support the desired profit gain. The tools and patterns that traders observe can be price bars, price bands, break-outs, trend-lines, or complex combinations of candlesticks, volatility, channels. The emotions and psychological behavior of traders also form an important aspect of the Price Action strategy. Basically, this trading strategy is a systematic trading practice. With the help of technical analysis tools and recent price history, traders are free to make their own decisions. However, traders who use this strategy must also take trading positions according to the subjective, behavioral and psychological state of the trader.
Who Uses Price Action?
Since trading using this strategy is an approach to price prediction and speculation, it is used by retail traders, speculators, arbitrageurs, and even trading companies that employ traders. It can be used on a wide range of securities including equities, bonds, forex, commodities, derivatives, etc.
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