What is Forex Price Action?

Forex price action is a trading method that involves purchasing and selling securities based on their prices’ fluctuation or action. The price action trader uses the candlestick or bar charts to view the data.

Price action traders in the forex market rely on a “naked” chart and reject the inclusion of indicators. The primary reason is that supplemental indicators lag interpretations of data available on the price chart. So, they think the action of price is the most accurate and reliable indicator.

The price movements’ have different patterns that reveal in real-time based on the supply for sale and the purchasing demand of a currency pair or security. Price changes imply shifts in the relationship between sellers and buyers. It means an increase in supply pushes the price down. On the other hand, an increase in purchasing demand sends prices higher.

Price Action Definition

The price action definition focuses on the price movements of a security and its essential characteristics. If you are confused about this definition, let us tell you the price action definition in simple words.

So, it is a trading method that enables you to analyze the forex market and make subjective decisions by focusing on the actual and recent price movements. A price action trader does not focus on technical indicators.

Price Action Trading Strategies

There are many price action trading strategies. However, not all of them are best, especially if you don’t know how to use the strategy. If you are a beginner and want to become a successful price action trader, make sure you focus on the following price action trading strategies. Continue reading!

Day Trading Strategy with YM Futures

If you want to carry out a successful day trading, you need a volatile and liquid market. The most popular trading markets are NASDAQ-100 E-mini (EQ) and S&P 500 E-mini (ES). However, you also have an excellent option of an E-mini DOW (YM) futures contract.

The trading volume of YM future among equity index futures ranks right after NQ and ES futures. YM futures is an electronically traded contract like ES and NQ and has the Dow Jones Industrial Index. The value changes by $5 for a single-point movement in this index.

Trading Consecutive Up/Down Days with Lower Risks

It is one of the best price point trading strategies, allowing traders to get excited when the market closes up for consecutive days. Forex price action traders speculate that the market can’t continue or maintain an upward streak.

That’s why this strategy of up/down days provides a basis for stock scans and market research. Most traders focus on determining whether there is an edge in purchasing after consecutive down days or selling after up days.

We recommend buying after up/down days and selling after seven or ten days. Likewise, when you use this strategy, you have to test four or five days down or up. You will also have to build a heat-map of QQQ returns after up/down days.

Make sure you approach the trading ideas as a quantitative system trader. We believe that the results are promising. However, they are not entirely conclusive of the actual trading edge. We think this is particularly true for price action traders.

Three-Bar Reversal Pattern for Day Trading

Tree-bar reversals are common in intra-day time-frames. You can use the three-bar strategy for day trading and streamline the entire process. However, if you want to choose the best patterns of three-bar reversal, make sure the third bar is close above the highs of the other two bars.

When it comes to trading rules for long, make sure the first bar closes down and the second bar is below the low of the first bar. Likewise, it is crucial that the third bar must close above the high bar of the first and second bar.

On the other hand, rules for short trading require the first bar closes up, the high of the second bar is above the high of the first bar, and the third bar closes below the low of the first and second bar. Make sure you sell at the close of the third bar. Although this seems a little confusing for beginners, you can get the most out of it when you research and learn this strategy.

Final Words

Forex price action trading offers a wide range of benefits to the trader. For instance, it gives you a relevant market perspective, and performing market analysis is a time-tested strategy. Likewise, it is pretty easy to set up your forex price action account. Good Luck!