Price Action is King

Price action is one way to analyze and read the market movements of various instruments. The method is applicable to all markets and it is one of the most widely used methods. From a perspective of a forex trader, price action means trading purely according to a price chart without technical indicators. After all, technical indicators are derived from the price, so it is certainly worthwhile to learn to read the market based on pure price movements.

When using price action, traders study historical prices and try to identify the necessary signals from the chart. It is necessary to realize that the price action shows the flow of orders on the market. So based on the price action, the trader studies what other traders did, and identifies where the order flow is going. If the trader identifies a significant impulsive movement, he will try to trade in that direction.

Why Choose Price Action Trading?

One of the benefits of the price action is that it works very well on higher time frames used by large banks that have enough capital to move the market where they want. Retail traders do not have such possibilities, but they can use price action on higher timeframes to identify what these market players did in the past and what they will probably do again.Another advantage is that by using the price action it is possible to identify different patterns that are repeated in the markets with a certain probability.

Once you learn how to read these market patterns, you will clearly know what you are looking for in the market and therefore it will be easier for you to determine the parameters of the trade. An example of such a pattern is a trendwhere higher highs and higher lows alternate regularly in the case of an uptrend or lower high and lower lows in the case of a downtrend.