Price Action describes the characteristics of a security's
price movements. This movement is quite often analyzed with respect to price changes
in the recent past. Rather than relying solely on technical indicators price
action allowing a trader to make subjective trading decisions by reading the
market based on the recent and actual price movements, is a trading technique
in simple terms.
The price action trading strategy is dependent on technical
analysis tools as it ignores the fundamental analysis factors and focuses more
on recent and past price movement. Using price action you must learn how to trade forex.
What tools are used
for price action trading?
All technical analysis tools like charts, trend lines, price
bands, high and low swings, technical levels (of support, resistance and
consolidation), etc. are taken into account as per the trader's choice and
strategy fit as price action trading relates to recent historical data and past
price movements.
Price bands, simple price bars, trend-lines, break-outs or
complex combinations involving candlesticks, volatility, channels, etc are the
tools and patterns observed by the trader.
As decided by the trader, an important aspect of price
action trades is made up by psychological and behavioral interpretations and
subsequent actions. For e.g., the trader may assume a further upward move to
take a long position if a stock hovering at 580 crosses the personally-set
psychological level of 600, no matter what happens. He or she assumes a price
reversal and hence takes a short position while other traders may have an
opposite view - once 600 are hit. If you need help the best forex broker in Australia
can guide you.
As each will have his or her own interpretation, defined
rules and different behavioral understanding of it, no two traders will
interpret a certain price action in the same way.
Aided by technical analysis tools and recent price history,
price action trading is a systematic trading practice. Here to take trading
positions, as per their subjective, behavioral and psychological state traders
are free to take their own decisions within a given scenario.
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