Last updated on October 16th, 2020 at 10:34 pm
Fundamentals of price action Strategies in Forex Trading
In Forex trading, price action strategies are widespread as well as powerful tools used to determine the upcoming conditions of the marketplace. If you want to be a long-term or a short-term trader, you need to know about these methods. Ultimately, you will increase your trading performances.
There are four fundamentals of price action techniques. They are:
- Bearish movement
- Bullish movement
- Flat market
Hence, before investing in Forex trading, it would be best if you have a clear idea of the above terms. It will be helpful for your understanding of price action strategies.
In this article, we are going to dive into the trendiest price action strategies.
Price Action Strategies in Forex Trading
1. Resistance and Support
These two terms are essential indicators of different price levels. We observe that when the price levels are in these two positions, then the balance of the sellers and the purchasers are altered. When the price resistance is high, then more sellers will get the opportunity to access the Forex market and sell their currencies. If the value resistance is in the same stage, at that time, the smaller number of sellers will remain in the marketplace. This phenomenon is known as order absorption.
Finally, we can say that if the rate or value of currency or stock stays in the same state, then the traders consider this condition significantly because this situation aids them in making trading choices.
2. Chart segments or phases
Chart segments are a vital part of price action techniques. Some of them are:
Whenever the value or cost of the currencies rise, this state is known as an upward trend or style, bull market or rally. Conversely, when the price level falls repeatedly, then we call this situation as a downward style or movement and also bear market. If you intend to trade listed options, make sure you know everything about the different phases of the trends.
This phase of the chart indicates the short cost level in opposition to the previous movement. Modifications are in short- term stages when prices are in rising sign. Besides, if the price rate moves toward the upward and downward, then it is called price waves.
The side phase of the chart or list is called Consolidations. In this stage, we notice that the price of the stocks or currencies is staying in the side position.
This term makes a relationship between the new trends and Consolidations.
· Trend reversal
If the severity of a Correction continues for a long period, then a trend reverses and create a new one. These phases of the chart are significant as they represent the role of a purchaser and a seller. We will analyze the price level quickly if we comprehend these terms conspicuously.
3. Location selection
Selecting the right location can be a great strategy for price action. The difference between a pro trader and an amateur trader is choosing an appropriate place or site for themselves.
So, by choosing a demanded area, you can run your business nicely.
4. The hints of price action and candlesticks
There are four signs or clues of price action and candlesticks. These are:
· The size of the wicks
When the amount of uncertainty and volatility increases, then you will see many wicks in the price chart.
· Bearish versus Bullish wicks
If you notice that there are many longer wicks that are in an upward or downward position in the price list, then for the first state, you should consider that the price is in Bullish movement. So, the cost of the currency will increase. Conversely, if the price of the product decreases, the market is moving in a Bearish trend. Hence, by analyzing the financial market, the buyers, as well as the sellers, will buy or sell their assets.
· The state of the candlesticks’ body
Notice the position of the candlestick, whether it is in the bottom or top form.
· The body
The small body but big wick of the candle indicates the indecision of traders. On the other hand, a big body with a tiny wick signals ample strength.
Finally, by adopting the above techniques of price action in Forex trading, you will become a professional trader.