Overview of price action trading

1. Overview of
Price Action
Trading
THE FOREX SECRET

2. Price Action Trading
• Every technical trader who makes his decisions
based on price charts, as opposed to analyzing the
fundamentals, trades in a different way.
• he thousands of different strategies traders use
typically fall into three classifications: price action
traders, indicator traders, and traders who use
both.
• There are also more niched strategies, such as
seasonality, order flow, or statistical.

3. Defining Price Action
Trading
• Price action trading means basing your trading
decisions on the price movements of an asset.
• You won't use indicators or other methods of
analysis, but if you do, you'll give them very little
weight in the trading decision process.
• A price action trader believes that the only true
source of information comes from the price itself.
• If a stock goes up, that tells the price action trader
that people are buying.

4. Defining Price Action
Trading
• If a stock goes up, that tells the price action trader that
people are buying. The trader then assesses, based on
the aggressiveness of the buying, whether it will likely
continue.
• Price action traders don't typically concern
themselves with why something happens.
• Using historical charts and real-time price information
such as bids, offers, volume, velocity, and magnitude,
the price action trader looks for a favorable entry point
for their trade.
• A favorable entry point is one that allows risk to be
controlled, but also offers a potential profit.

5. Types of
Strategies

6. • One common price action strategy is called a breakout. When the price of an
asset has been moving with a certain tendency, once it breaks that tendency,
it alerts traders to a new possible trading opportunity.
• For example, assume a stock has traded between $11–$10 for the last 20
days, then moves above $11.
• This change in tendency alerts traders that the sideways movement has
possibly ended and that a possible move to $12 (or higher) has begun.
Types of Strategies

7. • Breakouts occur from many different types of patterns, including ranges,
triangles, head and shoulders, and flag patterns.
• A breakout doesn't mean the price will continue in the anticipated direction,
and it often doesn’t.
• This is called a false breakout, and also presents a trading opportunity in the
opposite direction of the breakout.
• Breakouts can be small or large.
Types of Strategies

8. • When watching for small consolidations, or short periods where the price
moves sideways, breakouts during a trend can provide excellent profit
potential.
• Other price action strategies consider how price bars form on a particular
type of chart.
• For example, when using candlestick charts, traders use candlestick
strategies, such as the engulfing candle trend strategy.
Types of Strategies

9. Benefits and
Drawbacks
• Once you know a price action strategy, it won't
require much research time.
• Find an asset with the specific price conditions
you need, or wait for those conditions to develop.
• As another benefit, you often get more favorable
entries and exits compared to many indicator-
based methods.
• Although indicators use price as their basis, they
often lag behind it.
• By simply focusing on the price, you get the
information in real-time instead of waiting for a
lagging indicator to give you information.

10. Benefits and
Drawbacks
• It's difficult to automate price action strategies,
which is a drawback.
• That means you'll need to watch for patterns to
develop and manually trade them yourself.
• This isn't a problem for most people, but if you
had hopes of creating a trading robot that could
trade for you, many price action strategies do not
lend themselves well to that process.

11. Benefits and
Drawbacks
• Price action isn't perfect. Just as you'll have
losing trades with other types of trading
strategies, you will have losing trades using
price action as well.
• Even though price action sounds great in
theory, you can only know what the price has
been doing up until you get into a trade.
• If the price was moving higher and you buy,
the price could start to drop shortly after.
• You can never avoid such circumstances.
• The only thing that matters is that you win
more than you lose.

12. Thank You
LinkedIn
https://www.linkedin.com/in/the-forex-
secret/
Twitter
https://twitter.com/Dforexsecret
Email
candacethomas728@gmail.com
Website
https://theforexsecret.com/