Price action is a method used to interpret market movement without the need for indicators. It is mainly approached through visual analysis of candlesticks that display the high, low, open, and closing prices for a specific period. Traders probe candlestick patterns that reflect the impact of trends to decide foregoing trade actions.
The image above displays the parts of a candlestick that represents valuable trade information. The top wicks present how high the price has reached while the bottom wicks show how low the price has fallen. In the middle of the wicks and in between the open and close is the body of the candlestick. According to a timeframe, if the candle’s open and close is above, it is bullish; if it is below, it is bearish.
Initially, in the Price Action strategy, a trading day is the time span a particular exchange market is open for trade actions. Situation-wise, a day may close bullishly but upon closer inspection of lower timeframes, a bearish candle pattern may still be apparent. In concept, the candle body closed positively with the timeframe showing bearish candles that took the course over the day.
A timeframe pertains to the period a trader decides to trade based on their strategic preferences and comfortabilities. AximTrade utilizes MT4 platform with the following timeframes:
Market noise is a term used in the Price Action strategy and it consists of all price data that distorts the visualization of an underlying trend because it includes small corrections and intraday volatility. Noise removal is valuable to traders in terms of avoiding false signals and making logical analysis and decisions. Below is an example of an H4 chart with less noise
Visually, it is much more convenient and efficient to identify tops and bottoms using higher timeframes to identify the possible market directions. Based on depicting each high as a “swing high” and each low as a “swing low” traders may create continued direction probabilities. As shown in the chart above, the swing high still retains as the candle is yet to close above the previous high. This may be interpreted as the price having further possibilities to fall.
In conclusion, it is important to know that in the Price Action, understanding candlestick anatomy and identifying swings is still insufficient in executing orders because some candlestick patterns need to be mastered and interpreted accurately/correctly.
Guide to Forex Trading Stratgies
When you choose the best forex trading strategy it is important to know that every strategy has its benefits and drawbacks. There is no forex strategy that will work all the time and there is no certain level for profitability to generate. As you explore the different approaches, you will need to learn technical and fundamental analysis as well as mastering the MT4 platform. Copying a strategy without understanding the market movements and the ability to conduct trend analysis is risky.
Fundamentally, you will need to define your investment portfolio and find out your risk/reward ratios (R/R). Each forex investment should come with a solid plan and a good demonstration of trading basics. Avoid copying a forex strategy that doesn’t match your trading goals or strategies that you don’t fully understand and able to know what is the drawbacks of it. There is no perfect strategy in trading that can guarantee profit and in most cases, forex strategies can differ based on the market movements and news.
You will have to select the trading strategy based on what type of trader you are and your trading style. It should also depend on the currency pair or trading tool you wish to trade.
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