How Do I Analyze Forex Price Action in Trading?
How Do You Trade Forex Price Action in Trading?
Forex price action is analysis of price movements that are plotted on charts.
Forex price action strategy uses line studies or price action setups to try and determine the trend of the price chart.
Forex price action signals can also be combined with forex systems that can be used to figure out what direction of trading to take.
Pin Bar Price Action Strategy
A pin bar is a trend reversal signal on a price chart which displays an obvious change in market sentiment during that trading period.
This pin bar price action set-up has a long tail with the closing price near the open. The pin bar chart pattern looks like a pin thus the name Pin Bar - occurs after an extended move up or down.
This pin bar chart pattern - trend reversal is confirmed after market closes below the candlestick that precedes this price action pattern setup. Below the pin bar pattern reversal setup is confirmed after the market prices closes below the blue candlestick that preceded this pin bar candlestick.
FX Price Action 1.2.3 Technique in Forex
Forex Price action strategy is use of only price charts to trade FX, without use of technical chart indicators. When forex trading with this method, candle-stick charts are used. This price action strategy uses lines & pre-determined price patterns such as the 1-2-3 price action pattern that either develops as one price action pattern setup or series of price action setups.
Forex traders use this price action strategy because this analysis is very objective and allows a trader to analyze the price market movements depending on what they see on the charts and price movement analysis alone.
This price action strategy is used by many traders: even those that use technical indicators also integrate some form of price action in their strategy.
Forex Price Action 1.2.3 Break Out Strategy
This price action strategy uses three chart points to determine the price break out direction of a forex instrument. The 1-2-3 price action method uses a peak & a trough, these chart points forms chart point 1 and chart point 2, if price goes above the peak the signal is interpreted as buy signal, if price drops below the trough the signal is interpreted as a sell signal. The price break out of chart point 1 or chart point two forms the third chart point.
Forex Price Action 1.2.3 Break Out Strategy Example
RSI & Moving Averages
Good indicators to combine price action price action setups with are:
- RSI Indicator
- Moving Average Indicator
Forex traders should use these two indicators to confirm if the direction of the price action break-out is in line with the trend direction shown by these two chart indicators. If the direction is also the same as the direction of these indicators then traders can open a trade in direction of signal. If not traders shouldn't open a trade as there is more likely a chance that this signal may be a forex whipsaw.
Just like any other chart indicator in Forex, price action strategy also has whipsaws & there's a requirement to use this price action strategy as a addition with other signals as compared to just using this price action strategy alone.
Combining Price Action Strategy other Indicators
How Do I Analyze Forex Price Action in Trading?
