One very effective yet simple and easy to understand forex trading strategy is price action analysis, also known as price action trading. This is the art and skill of learning to analyze a “naked” or raw price chart with no lagging indicators. Essentially all we are taking into account with this forex trading strategy is a handful of naturally occurring and repetitive price patterns that form as result of daily price movement in the forex market.
We then combine these price patterns with confluent levels of support and resistance or retracement levels to “confirm” the setup. This method of trading has been used for literally centuries as the rice traders in Japan who created Japanese Candlestick charts used price action trading back in the 1700s.
Take a look at the video below to get a better idea of exactly what forex price action trading is all about. You will begin to notice that there are some very profitable price action patterns that occur naturally in the market almost every day. One of the best features of using price action to trade with is that it allows you to trade off higher time frames like the 4 hour, daily, and weekly charts. This allows you to “break free” from sitting behind your computer all day staring at your charts and waiting for a setup. You can basically take a look at your charts for as little as 20 minutes a day if you want, when trading price action setups, if your setup is there you enter your entry, stop, and target and walk away for 24 hours.
This trading technique of setting your trade parameters and then taking a “breather” while you let the market do the work is something that many traders do not fully take advantage of. Experienced traders will agree that as a general rule there is a negative correlation between the amounts of time you spend analyzing your charts and the value of your trading account. In other words, the more time you spend staring at your charts and over analyzing them, the more money you are probably going to lose as a result of moving stop losses, or targets, or adding on to positions. Of course, a certain amount of educational screen time is needed for you to really understand the mechanics of price action setups and how to fully and effectively implement them in the course of daily market movement. However, above and beyond this level of screen time education, sitting there and just watching your trades unfold is generally only going to hurt you in the end.
Using price action setups to trade the market with is one of the best simple forex trading strategies because it allows you to maintain an objective mindset while trading the markets. This objective mindset is something that is crucial to your existence and success as a trader. Existence might seem a bit harsh, but if you become overly subjective and let your emotions and feelings rule your trading decisions, you WILL blow out your trading account faster that you realize and thus cease to exist as a trader. Many traders eliminate the possibility of even developing an objective trading mindset right from the very beginning by using complicated trading methods or fancy sounding trading programs that muddy up their charts and their minds.
Price Action Forex Trading Strategies
