For a long time, I have lived and breathed the markets. There is nothing more entertaining than watching price movements live on your screen.
If I had to choose between watching the charts and European football championship finals, I'd gladly pick my charts. Trading Forex and price action is my only vice, and I really love it.
When traders ask me, what is my favorite indicator in Forex trading, my answer is always clear. It's the Price Action. Being an ultimate avatar of price, price action "indicator" tells me everything I want to know.
Being a professional trader with more than 10 years of experience, I've summed up the most important things in both PNT method on Forex Factory and Price Action Trading School. Today, I will explain top 6 reasons why price action is the king.
Historical Vs. Now Moment Concept
Contrary to stock market, in Forex market price action repeats itself. Not many people recognise great trading opportunities based on historical vs now moment price action.
Simply put, if the price rejected at one spot in the past it tends to reject again in now moment.
Aligning historical and now moment buyers or sellers is of extreme importance and the only way to do it to study the price deeply. Price behaves the way it does as a result of the behavioral patterns and decisions of the traders that are both human and algorithmic (algos) who are participating in the market at any given time.
Easy to Spot Price Action Patterns
Forex price action patterns like ABCD, Gartley, T-89 and others have proven to be a great indicator for spotting either reversals or continuation of price movement. When used properly, the patterns give us a hint to trade them when the circumstances are just right.
Momentum and Volatility
With Price Action trading, volatility is very easy to spot. Simply said without volatility, there is no way we can make money in the market. Volatility in the market is a good thing and with price action strategies it should be easy to spot it. This is how momentum and volatility are easily spotted with this simple price action strategy
Timing and Patience
Trading price action teaches traders about patience and professional attitude towards trading. Forex is not gambling, yet many traders use it as it were. Many investors will tell you that courage and patience are two of the most important ingredients for successful long term investing.
You need the courage to stand by your choices and the patience to ride out similar for successful trading. Although while you still need the courage in your methodology, you need the patience to wait out the market for the opportune time to strike.
Price action teaches you to become pressure-proofed. Pressure is created by anxiety. The anxiety of not knowing what will happen in the market. It is the uncertainty that comes with spontaneous trading.
This should not be you. Once you have the confidence, through testing and using price action strategies, you should become immune to pressure, and you will begin to trade with a calmness that is associated with professionals.
When all abovementioned things unite, we get something that we call a confluence- a POC zone. Price Action traders look for confluence to strengthen their decision to take on a trade. The POC is my trademark. As many of you may already know, paper trading is not at all like real trading.
When you look at chart and think that a top or bottom would have been a good place to buy or sell, you are effectively paper trading.
By using confluence (POC zone), I know in advance where buy or sell might take place. You should quickly learn why some people win and some people lose. They cannot do what we can with price action trading.
Of course, your account will not see a positive curve unless you deploy a good money management tactics. Everything is futile without successful usage of Holy Grail in Forex trading – Money Management.
So before you start trading price action patterns, carefully calculate your risk and think about how much you are willing to lose, not how much you should win. Eliminate greed and revenge, and you will already be one step closer to success in Forex trading.
Cheers and safe trading,