How to Get Started with Price Action Trading
By: Johnathon Fox
Price Action trading is a simple tool that traders can use to trade the Forex Market. Price Action trading is using the information that is presented to a trader in the form of raw data such as candles or bars that form trade ideas.
Price Action is appreciated by Forex traders for its simplicity as it involves using only key levels in the markets with proven Price Action formations to signal a trade setup. Standard Forex indicators such as MACD or Exponential Moving Averages are made using old price data to try and predict what will happen in the future. With Price Action trading traders use only the live price to manage each trade.
Take off all the indicators and start watching price
The first thing a trader interested in Price Action trading needs to do is take of all the indicators and clean up his or her chart. Indicators tend to make Forex charts look very messy and to hide the most important part of the chart - the price!
Messy Chart Full Of Indicators
Forget about the news
Price Action candles are thought to already have the news factored in. In other words whatever the news does it is already showing us on our charts. Of course at times new announcements will make price react a little more than usual, however price in most cases will already be showing us the way it before the news release.
For example price may be getting close to a support level and a news release is announced. Price most times will still respect the support level regardless of what the news had to say and from just watching and following raw price we could see what price was likely to do.
It is for this reason that keeping track of the news and trying to trade accordingly is just not necessary. The only thing trading the news does is increase the confusion for a trader. Traders will suffer analysis paralysis and in the end will not trade due to fear of doing the wrong thing. Price Action trading should help keep things simple.
Perfect one Price Action setup at a time with one time frame at a time
Don’t try to trade every setup all at once. Learn just one Price Action signal such as the Pin Bar and perfect it so you know what to do in every situation. Instead of being average at them all and master of none, learn one signal at a time and perfect it. This will put you at a much better advantage than the majority of the traders.
The same goes for trading in different time frames. Start with the longer time frames such as the daily and only trade on it. Until you have mastered that one setup on the daily do not go scanning down on the lower time frames just to enter rubbish setups.
Until you have perfected trading on the daily time frame you have no hope of trading on the smaller time frames. Trading smaller time frames such as the 1hr will just cost you money until you know what you are doing.