Trading price action is one of the most successful forex trading strategies around, yet there isn’t so much written about it as the more traditional strategies such as Fibonacci retracements and Elliot Waves analysis.
Let’s take a look at a typical forex price chart and what do you see? You have the chart itself, 1 or 2 moving averages, the RSI, MACD, stochastics, and maybe Bollinger bands. On top of that, your online forex broker is consistently feeding you with economic news that seems to come in every 10 mins. Depending on your trading setup, you might even have more than these popular indicators, and why is that? Because the more indicators you have, the more study you do, the higher chance of picking a winning trade, right?
The problem is that most ordinary folk get overwhelmed with all these forex indicators and forget to look at the most important component of the chart, and that is the price itself! And with lots of indicators means lots of conditions that have to be met before you determine whether a trade can be done, and most of the time the conditions will never be met. No trades equals no profits.
To trade price action, you have to first unlearn all the other forex strategies that you have previously learnt. Trading price action is a beautiful strategy that strips away all the indicators and all you need is a simple bar chart with 1 or 2 moving averages which will allow you to concentrate on the price movements instead. Because of this, it is sometimes known as naked trading.
The gist of FX trading price action is to trade with the trend and interpreting price behaviour to determine if the market is going to go up or down. All you need to do is to study how the price bars move and relate to each other and you’ll be able to predict the market movement with a high degree of accuracy.
If this sounds too good to be true, the reality is that trading price action requires you to study the charts and recognise certain patterns. It may not be easy to pick up on your own, but once mastered, it’s one of the most effective forex trading strategies available.