What is Price Action Trading in Forex?
Quick Answer: Price action is the analysis of raw price movement without indicators. Price action traders read candlesticks, support/resistance, and chart patterns to make trading decisions based on what the market is actually doing, not lagging indicators.
Understanding Price Action Trading
Price action is the movement of a security's price over time, and analyzing this movement without relying on indicators is called price action trading. It's the purest form of technical analysis - you're reading what the market is actually doing, not what a lagging indicator says it did.
Why Trade Price Action?
Price action traders argue it's superior because:
- No lag: Indicators are calculated from past prices, price action is real-time
- Clean charts: Less clutter means clearer decision-making
- Universal: Works across all markets and timeframes
- Direct information: See exactly what buyers and sellers are doing
Key Price Action Concepts
Core elements price action traders focus on:
- Support and resistance: Price levels where buying/selling pressure concentrates
- Trend structure: Higher highs/lows (uptrend) or lower highs/lows (downtrend)
- Candlestick patterns: Doji, engulfing, pin bars, inside bars
- Chart patterns: Head and shoulders, double tops/bottoms, triangles
- Supply and demand zones: Areas where institutional orders likely sit
Practical Example
EUR/USD has been in an uptrend, making higher highs and higher lows. Price reaches 1.1000, a previous resistance level. A long upper wick forms (pin bar rejection), showing sellers stepped in strongly. Price then breaks below the previous higher low at 1.0950, confirming the trend is broken. Price action traders would sell here - no indicators needed. The market showed its hand through pure price movement: resistance held, structure broke, trend reversed.
Related Terms
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