Price action trading

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The Definition of Price kích hoạt Trading

Price Action Trading (P.A.T.) is the discipline of making all of your trading decisions from a stripped down or “naked” price chart. This means no lagging indicators outside of maybe a couple moving averages to lớn help identify dynamic support & resistance areas và trend. All financial markets generate data about the movement of the price of a market over varying periods of time; this data is displayed on price charts. Price charts reflect the beliefs và actions of all participants (human or computer) trading a market during a specified period of time and these beliefs are portrayed on a market’s price chart in the khung of “price action” (P.A.).

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Whilst economic data and other global news events are the catalysts for price movement in a market, we don’t need to lớn analyze them lớn trade the market successfully. The reason is pretty simple; all economic data and world news that causes price movement within a market is ultimately reflected via P.A. on a market’s price chart.

Since a market’s P.A. reflects all variables affecting that market for any given period of time, using lagging price indictors like stochastics, MACD, RSI, and others is just a flat waste of time. Price movement provides all the signals you will ever need to lớn develop a profitable và high-probability trading system. These signals collectively are called price action trading strategies & they provide a way to lớn make sense of a market’s price movement và help predict its future movement with a high enough degree of accuracy khổng lồ give you a high-probability trading strategy.

“Clean” Charts vs. “Messy” Indicator-laden Charts

Next, lớn demonstrate the stark contrast between a pure Phường.A. chart and one with some of the most popular trading indicators on it, I have sầu shown two charts in the examples below. The chart on the top has no indicators on it, there’s nothing but the raw P.A. of the market on that chart. The bottom chart has MACD, Stochastics, ADX and Bollinger Bands on it; four of the most widely used indicators AKA “secondary” analysis tools as they are sometimes called:

The image example below shows a clean price action chart, with no mess, & no indicators, just pure price bars:

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The image example below shows a messy price action chart, with lots of clutter, indicators & mess:

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It’s worth pointing out how in the indicator-laden chart you actually have sầu khổng lồ give sầu up some room on the chart to have the indicators at the bottom, this forces you khổng lồ make the P.A. part of the chart smaller, & it also draws your attention away from the natural P.A. & onlớn the indicators. So, not only bởi you have sầu less screen area lớn view the Phường.A., but your focus is not totally on the price action of the market like it should be.

If you really look at both of those charts và think about which one is easier to lớn analyze and trade from, the answer should be pretty clear. All of the indicators on the chart below, and indeed almost all indicators, are derived from the underlying P..A.. In other words, all traders vì chưng when they add indicators khổng lồ their charts is produce more variables for themselves; they aren’t gaining any insight or predictive sầu clues that aren’t already provided by the market’s raw price action.

Examples of some of my favorite price action trading strategies:

Next, let’s take a look at some of the price action trading strategies that I teach. chú ý that I’ve included a “failed” trade cài đặt because not every trade will be a winner; we aren’t here lớn show you “perfect” past trading results…we are here khổng lồ teach you in an honest và realistic manner.

In the image example below, we are looking some of my favorite P.A. trading strategies:

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Determine a market’s trkết thúc using price action

One of the most important aspects of learning to lớn trade with P..A. is lớn first learn how lớn identify a trending market versus a consolidating market. Trading with the trover is highest-probability way lớn trade and it’s something you HAVE TO learn how to bởi vì if you want lớn stvà a chance at making serious money as a trader.

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The charts below shows how to use price dynamics to determine a markets trend. We consider a market lớn be in an uptrend if it is making Higher Highs & Higher Lows (HH, HL) and a downtrkết thúc is Lower Highs & Lower Lows (LH, LL).

In the image example below, we can see how higher highs & higher lows signal an up-trover in a market:

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In the image example below, we can see how lower highs & lower lows signal a down-trkết thúc in a market:

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Determine Trending VS. Consolidating markets using price action

As we discussed earlier, Phường.A.or “price action trading analysis” is the analysis of the price movement of a market over time. From our analysis of price movement we can determine a market’s underlying directional bias or “trend”, or if the market has no trend it is said lớn be “consolidating”…we can easily determine whether a market is trending or consolidating from simply analyzing its Phường.A.. We saw how khổng lồ determine a market’s trend above, khổng lồ determine if a market is consolidating we just look for an absence of the HH, HL or LH, LL patterns. In the chart below note how the “consolidating price action” is bouncing between a horizontal tư vấn & resistance level and is not making HH, HL or LH, LL but is instead going sideways…

The image example below shows a market moving from a consolidation phase to lớn a trending phase:

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How lớn Trade with Price kích hoạt Trading Strategies

So how exactly vày we trade with price action? It really boils down to lớn learning to trade Phường.A. setups or patterns from confluent levels in the market. Now, if that sounds new or confusing to lớn you right now, sit tight and I will clarify it soon. First we need khổng lồ cover a couple more things:

Due lớn the repetitive nature of market participants & the way they react lớn global economic variables, the P..A. of a market tends lớn repeat itself in various patterns. These patterns are also called price action trading strategies, và there are many different price action strategies traded many different ways. These reoccurring price patterns or price action setups reflect changes or continuation in market sentiment. In layman’s terms, that just means by learning lớn spot price action patterns you can get “clues” as to where the price of a market will go next.

The first thing you should to lớn begin P..A. trading is khổng lồ take off all the “crap” on your charts. Get rid of the indicators, expert advisors; take off EVERYTHING but the raw price bars of the chart. I prefer to lớn use candlestick charts because I feel they convey the price data of the market more dynamically và “forcefully”, if you are still using classic bar charts and want more info on candlesticks then checkout this candlestichồng trading tutorial.

I like simple blaông xã và white charts the best, as you can see below. In metatrader4 you simply right click on the chart & adjust the “properties” of the chart to lớn get it looking like mine below. If you want more info on how khổng lồ setup your MT4 trading platform checkout this metatrader 4 tutorial.

After you’ve sầu removed all the indicators và other unnecessary variables from your charts, you can begin drawing in the key chart levels và looking for price action setups khổng lồ trade from.

The image example below shows examples of some of the trading strategies I teach in my price action trading course. chú ý the key support / resistance levels have sầu been drawn in:

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How lớn trade price action from confluent points in the market:

The next major step in trading P.A. is khổng lồ draw in the key chart levels & look for confluent levels to lớn trade from. In the chart below we can see that a very obvious và confluent pin bar setup formed in the USDJPY that kicked off a huge uptrkết thúc higher. lưu ý that the pin bar trade thiết lập showed rejection of a key horizontal tư vấn cấp độ as well as the 1/2 retrace of the last major move, thus the pin bar had “confluence” with the surrounding market structure…

In the image example below, we can see a pin bar cài đặt that formed at a confluent point in the market:

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All economic variables create price movement which can be easily seen on a market’s price chart. Whether an economic variable is filtered down through a human trader or a computer trader, the movement that it creates in the market will be easily visible on a price chart. Therefore, instead of trying to lớn analyze a million economic variables each day (this is impossible obviously, although many traders try), you can simply learn khổng lồ trade price action, because this style of trading allows you to lớn easily analyze & make use of all market variables by simply reading and trading from the P..A. trail they leave sầu behind in a market.

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Closing thoughts on Price kích hoạt Trading…

I hope today’s introduction khổng lồ Price Action Trading has been a helpful & enlightening lesson for you. No matter what strategy or system you over up trading with, having a solid understanding of Phường.A. will only make you a better trader. If you’re like me, and you love sầu simplicity & minimalism, you’ll want to become a “pure” Phường.A trader và remove all unnecessary variables from your charts. If you’re interested in learning how I trade with simple price action strategies, checkout my Price Action Trading Course for more info.