Five Simple Ways to use Price Action to Trade in Forex
Unlike the stock exchange which is relatively hard to predict, the forex market leaves out several clues that could be pieced together to attain valuable insight. Analyzing these clues can help forex traders in Nepal understand the market better, and arrive at a viable future course of action. A standard approach is to use Price Action Trading (PAT), a form of technical analysis that solely focuses on past prices that have prevailed in the market. What is it? One of the most used Forex trading strategies, price action trading is where traders make all their decisions using a stripped down version of price charts. The logic is simple; global events and economic data influence the price movements in the market, which means viewing the data generated over a period of time on price charts gives all the insight one needs to trade in the market. This approach provides all the necessary signals required to predict the future price movement with some degree of accuracy and to execute a profitable trade. How can it be used? Understanding its language Charts provide useful data on the past movements in price. However, what matters the most is learning to read this data and understand what the market is trying to tell you. You need to learn to ‘listen’ to what price movement is trying to tell you and make decisions accordingly. Observe the closing price
You cannot interpret the market while a price bar is still open. You can only have a say when the price closes either on bearish or bullish terms. Wait till a bar/candle has closed out to make your move. Know the time frames New price action traders are often left in the lurch when it comes to choosing the time frame. If you’re a scalper who’s looking to hold positions for no more than 20-30 minutes, the data on a monthly or weekly chart is relatively inconsequential to you, but shouldn’t be ignored altogether. The key is to adopt multiple time frame analysis, wherein a balance is struck, and various charts are read. Watch and learn When utilizing the price action trading approach, you need to learn to patiently watch the market and let it do the talking. In other words, the market speaks to you, and this gives you an edge that prevents you from engaging in over-trading or listening to your own emotions. Never chase the unusual There may arise periods where the prices break out of their previous support or resistance. When something ‘new’ happens, it’s unwise to open a new position, because of the lack of recent data to derive an observation from. For deeper insight into price action trading and other trading strategies, reach out to one of the best Forex brokers in Nepal. Choose WesternFX to open a trading account and pave the way to success in the forex market.