Price Action Trading Guide for Forex Traders

What is Price Action Trading?

• Price action trading in forex is a trading method based solely on analyzing previous price behaviors. This means that a trader analyzes market conditions on a naked chart without using additional indicators or oscillators.

identify Trends

• The most important process in a price action trading strategy is in identifying ongoing trends. You should always try to trade in accordance with the prevailing trend whenever possible.

Price Consolidation

• Price consolidation is when the price is ranging without any clear direction. For most traders, a good trading rule would be to stay out of the market when the price is consolidating in order to avoid whipsaws.

S/R Levels

• Traders use support and resistance levels to set entry and exit points on their trading position when trading with price action.

S / R Levels

• Every forex trading strategy can benefit from proper support and resistance identification.

Breakouts

• One of the most common ways to trade key levels is simply by trying to go with the market flow after the price has shown its bias toward a support or a resistance level

Trendlines

• Trend lines act the same way as a horizontal support or resistance. The difference is that a trend line is diagnonal

Channels

• Channels act the same way as a trend line. The difference, though, is that channels have another level, which forms a corridor with the trend.

Candlesticks

• The use of candle patterns is a very common technique for price action traders.

Chart Patterns

• Chart patterns are specific formations and figures on the chart which give clues to potential trend continuations and reversals.

Measure Moves

• In many cases, chart patterns have the potential to move a forex pair with an amount equal to the size of the formation. This is typically referred to as a measured move.

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