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Business trading is not simple anymore. You must have in-depth knowledge of hundreds of factors that could play a vital role in bringing about a change. Businesses invest time and effort to make a strategy that could help them in achieving their goals. They pay hefty amounts to business experts to help them do that and guide them about the future.

What is Price Action Trading?

In one of our recent posts, we provide detailed introduction to price-action trading strategy. Price action trading is a method by which you can analyze a few factors before making the decision and neglecting other factors. You look at a couple of indicators and trends in price action trading. Price action trading is mainly focused on the data of movement of price and the time it takes for the price movement. This data is indicated on a price chart. It shows the actions of humans and machines that are involved in trading market.

When these actions are viewed with respect to time, they become price action that it also presents in price charts. The biggest drawback of price action trading is it neglects global events which could have a positive or negative impact on the price. But the advantage is that you can trade successfully without considering global events and other factors using price action trading.

The main reason is that all the global events changes and economic data is indicated through price action on a price chart. Price action shows a glimpse of all elements that are influencing the market with respect to time using different indicators such as MACD and RSI. You must only focus on price movements and you can easily conduct profitable trading business.

Forex Trading and Price Action Trading

You will have to learn what the patterns in the market is saying and then do Forex trading. The price action may repeat itself because the same participants interact in the same way with the system. Many price trading strategies are used in different ways. Price action reflects change or continuation of market situations and opinion. Analyze the original price and leave out all other indicators out of your charts in Forex trading. Economic and currency data do influence the price in Forex trading.

Price Action Trading Strategies

There are many price action trading strategies out there. Some of them are as follows:

Fakey Trading Strategy

Fakey trading strategy is a commonly used price trading strategy and highlights the neglect of an important level within the trading market. The pattern consists of inside bar, false break of inside bar and close back inside the range in the same order as mentioned here. The entry is done when the price moves. The entry is recorded when the price moves higher than the level of inside bar. Another variation of Fakey trading strategy is bearish Fakey. The only difference is that the entry is recorded when price moves lower than the inside bar in bearish Fakey.

Inside Bar Strategy

Inside bars are completely contained within the boundaries of a previous bar. It can show a brief consolidation and start to move in the trend direction which is dominating the market. Analyzing inside bars on a daily and weekly basis can be more fruitful. There is a large reward and small risk at stake in this strategy and this is why most traders love this price action strategy.

Swing Trading Strategy

Swing trading holds middle ground between buy and hold traders or day traders. Basically, swing trading is a moderate method and focused on market trends and momentum. It gives you the chance to pocket larger profits than other trading strategies. Many traders won’t like to use swing trading strategy because they want frequent trade signals which swing trading don’t provide.

You don’t have to put in a lot of effort to be successful in swing trading. You just have to do a market analysis on a daily basis or if you want to keep yourself updated you can do it twice a day. Closing price of the day is of great importance for swing traders. When a trade signal reaches swing traders, they can set their trade order by inputting stop and target price and entry and do their business.

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To succeed in today’s trading world, you need to be aware of what is going on the market so you can accurately predict what could happen in future. Your biggest chance of survival and making it big in the industry is to know and do things according to a plan or a strategy. This will make it easier for you to achieve your goals.

Price Action Trading

Price action refers to the fluctuation in prices, either high or low. It is analyzed by considering the price changes that have occurred in the recent past. This gives an overview of the market to the trader and what he could expect in days to come. The trader can also make short-term decisions based on this analysis. It depends on technical analysis tools instead of looking at other indicators.

Price bands, price swings (high or low), trend lines, charts, break outs, etc are the technical tools which can be used to analyze the price action. Each trader has his own method to interpret the information they receive. Behavior and psychological aspects also play a crucial role in the decisions made by the traders. For example, if a market is showing a positive trend for a week, traders believe it will continue to do so in the future, which is always not the case.

Uses

Price action trading is mostly used to speculate and predict future trend and price movements. It is mostly used by speculators, retail traders and trading firms. It is used in many types of trading, such as Forex trading, bond, equity, and commodity trading. Traders recognize trading patterns using price action trading and keep an eye on stop losses and entry and exit levels among other indicators.

Strategies

Using a single strategy on a stock will restrict your trading opportunities. Use a combination of strategies to be more effective when trading. The first thing you need to do is to identify the situation when things go high or low, break outs occur etc. Next, analyze the scenario and identify trading opportunities such as when it is more feasible to trade? When the market will go up or down? Trading opportunities vary from trader to trader. It is a highly volatile market so you need to be alert to be successful and keep an eye on trends and what experts say.

Make a strategy by considering different factors which influence the price shifts and your trading goals. Action trading analysis and price analysis is done through tools but the decision has to be taken by the trader after closely assessing and studying the results of the price action analysis. Price action trading strategies works well for short to medium-term investments. It is not that effective when it comes to long-term investments.

Advantages of Price Action Strategy

The trading markets follow a random pattern which may be hard to predict but if you keep an eye on various factors which influences price changes, you can speculate what will be the future of the market. A price action trading strategy offers traders the liberty to choose a strategy that suits their needs best. As mentioned before, action trading strategies can be applied on different kinds of trading, such as bonds, equity, commodities and Forex.

The biggest advantage of price action trading is that it gives control and power to the trader so he can decide according which set of rules would be better suited for them instead of following rigid rules. You can easily use a price action trading strategy through trading software. A software gives you charts, graphs and uses other tools to present data in an organized way so you can make a plan or a strategy to achieve your goal. Using the right combination of strategies can lead you to success. You can also test your price action strategy before you apply it, which is an added advantage.

You can apply the same strategy you have chosen on past data and see the results before applying it in future trading. Decide on a strategy after analyzing your requirements carefully. You can also set limits within which you can sustain the price fluctuations of stocks. Many traders support price action trading strategies for their advantages.

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