Price Action 1.2.3 method in the Market
Price action is the use of only charts to trade XAUUSD, without use of trading chart technical indicators. When trading using this method, candle charts are used. This strategy uses lines & pre determined patterns such as 1-2-3 pattern that either develops or sequence of bars.
Traders use this trading strategy because this trading analysis is very objective & allows the one to analyze the gold market moves based on what they see on the trading charts and market movement analysis alone.
This strategy is used by many traders: even those that use technical 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 tools so as to provide extra confirmation. These line tools include trend lines, Fib retracement, support and resistance zones.
Price Action 1-2-3 Break Out
This strategy uses 3 chart points to determine the break out direction of a xauusd. 1-2-3 method uses a peak and a trough, these points forms point 1 and point 2, if market goes above the peak the signal is long, if it falls below the trough the signal is to short. Break-out of point 1 or point 2 forms the third point.
Series of break-outs on Chart
Investors use price action to try and predict where a trend direction may go. The market is either trending or ranging.
A trending market heads in a particular direction while a ranging market moves sideways, normally after hitting a support/resistance zone.
Observing the behavior of price action provides this data of whether the market is trending, ranging or reversing its direction.
As with any other XAUUSD strategy this method should also be combined with other confirming indicators to avoid whipsaws. The 1-2-3 setup can give good signals in a trending market but will give fake outs when the market is ranging, it is best to determine if the market is trending or not before you start using this trade strategy.
Combining This Strategy with other Technical Indicators
Good indicators to combine with are:
- RSI
- MA Indicator
Investors should use these 2 indicators to confirm if the direction of breakout is in line with the 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 signal. If not investors should not open a trade as there is more likely a chance that this signal may be a xauusd whipsaw.
Just like any other indicator in XAUUSD, price action also has whipsaws and there is a requirement to use this trading strategy as a combination with other signal as opposed to just using this trading strategy alone.
Combining with other Indicators - RSI and Moving Averages
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