CFD Price Action 1-2-3 method in the CFD Market

CFD Price action is the use of only charts to trade CFD, without the use of technical chart technical indicators. When trading with this technique, candlestick charts are used. This strategy uses lines & pre determined patterns such as 1-2-3 trading pattern that either develops or sequence of bars.

Traders use this strategy because this analysis is very objective and allows the one to analyze the cfd market moves based on what they see on the cfds charts and market movement analysis alone.

This strategy is used by many traders: even those that use indicators also integrate some form of price action in their trading strategy.

The best use of this technique is achieved when the signals generated are combined with line studies so as to provide extra confirmation. These line studies include cfd trend lines, Fibonacci retracement, support & resistance levels.

CFD Price Action 1-2-3 Break-out

This strategy uses 3 chart points to determine the break-out direction of a cfd. The 1-2-3 method uses a peak & a trough, these points forms point 1 and point 2, if market moves above the peak the signal is long, if it moves below the trough the trading signal is to short. The break out of point 1 or point 2 forms the third point.

Series of breakouts on CFDs Trading Chart

Investors use cfd price action to try & predict where a cfd trend direction might go. The cfd market is either trending or ranging.

A trending market moves in a particular direction while a ranging market moves sideways, normally after hitting a support or resistance zone.

Observing the behavior of cfd price action provides this data of whether the cfd market is trending or ranging or reversing its direction.

As with any other CFD Trading strategy this method should also be combined with other confirming indicators to avoid whipsaws. The 1-2-3 pattern can give good signals in a trending market but will give whipsaws when the cfd market is ranging, it is best to determine if the cfd market is trending or not before you start using this strategy.

RSI and Moving Averages

Good technical indicators to combine with are:

• RSI

• Moving Average Indicator

Investors should use these 2 indicators to confirm if the direction of breakout is in line with the cfd trend direction shown by these 2 indicators. If the direction is also the same as those of these indicators then investors can open a trade in the direction of the signal. If not investors should not open a trade as there is more likely a chance that this cfd signal may be a cfd whipsaw.

Just like any other indicator in CFD, cfd price action also has whipsaws & there a requirement to use this as a combination with other signal as opposed to just using this strategy alone.

Combining With other Indicators - RSI and Moving Averages