Business

What is Price Action?

Price action allows to analyse the Forex Market with out using indicators.

Price action

What is Price Action?

  • Price action trading allows you to analyse the Forex market without using indicators.
  • Instead of indicators you use candles, support and resistance, and other chart analysis to make trading decisions.
  • Price action is perfect for scalp trading because it allows you to make quick trade decisions.
  • I won’t cover price action basics here, if you want to learn the basics, check out my free price action strategy.
  • The point is that price action analysis allows you to predict with a high degree of accuracy what price will do next by understanding who has control of price, buyers or sellers.
  • If buyers are in control, you want to buy. If sellers are in control, you want to sell. It all seems very simple right? Well, some newbies make price action a lot more difficult than it needs to be.
  • So let me tell you a secret that will help you be a better price action trader.

Who’s in control of price?

  • Who’s in control of price?
  • Those five words are vital when trading price action.
  • If you ask yourself that question every time you look at a chart, you will be a better trader.
  • I do most of my trading on larger time frames, and even on those larger time frames I constantly ask myself “who’s in control of price?”.
  • That one simple question keeps me profitable and it keeps me from making mistakes.
  • And here is why.
  • The question only had three possible answers.
  • Buyers are in control.
  • Sellers are in control.
  • Price is undecided.
  • If you spot a short trade which you want to enter and you ask yourself “Who’s in control of price?”, would you enter if the answer is buyers?
  • No, of course not, if buyers are in control you do not want to sell yet.
  • Asking yourself “who’s in control of price” forces you to think about price objectively.
  • It forces you to properly analyses price. Instead of making a hasty decision, you are forcing myself to make an informed decision.
  • Now, if I ask myself that question when trading 12 hour charts. Imagine how much more important it is when I am price action scalping a 5 minute chart; when I only have about 30 seconds to make a trading decision.
  • So, if you want to trade my Forex price action scalping strategy, memorise that question.
  • Who’s in control of price?
  • Being able to answer that question quickly and effectively is vital. And, it is also very stressful, which brings me to my next point.

Scalp Trading & Price Action

  • So why do scalp trading and price action work so well together?
  • Price action trading is about being in tune with what price is doing right now, so you can predict with a high degree of accuracy what it will do next.
  • Scalp trading is about the same thing.
  • A scalp trade normally only lasts 5-30 minutes. So, to scalp effectively you need to analyse what price is doing right now, and what it will do for the next 30 minutes or so.
  • So, what about indicators?
  • Most traders use indicators for scalping, which is a bad choice. The problem with indicators is that they lag behind.
  • Scalp trading and lagging behind just don’t mix well together. Scalping requires quick analysis, quick decisions, and quick trading.
  • And at it’s core, price action trading is all about speed and efficiency.