The Advantages of Using Price Action Trading

  

I'm sure many struggling traders have heard of price action forex trading, but most don't really know what it actually means. In its most basic terms, it means to trade without indicators or any other kind of assistance.

price actionBut there is a little more to it than just that. Its like seeing the market in its purest form, even during the demo trading.  There are no gimmicks with it.  You can see exactly where the market has been and where it is headed.  Here are some of the many great benefits of trading with price action.

Support and Resistance Areas.

I know that you can use those standard support and resistance areas that are based on the same generic formula:

First area of resistance = R1 = 2P - L
First area of support = S1 = 2P - H
Second area of resistance = R2 = (P -S1) + R1
Second area of support = S2 = P - (R2 - S1)

It may look nice seeing your charts have that S1, S2, R1, R2, but those have absolutely nothing to do with support and resistance.

There is no formula or calculation that can give you true support and resistance areas.

It's all done through price action. The true areas of support and resistance are points in the market of the greatest volatility and how traders react to it.

The greater the volatility, the more obvious the support and resistance areas are.

You ever hear traders say during slow times of the market, they can't tell when to open a trade because they are not sure where the price is headed or because they can't find the key points to enter?

There is a good reason for that.  When there is very little movement in the price, its like the market is whispering and the traders can't hear it.  We need those big volatile moves to let us know what is going on.

Another great advantage of price action is the ability to tell where the trend of the market is, so you can make sure that you are trading with it, not against it. This is something that every trader should know about.

A lot of people believe that you can use moving averages to spot the trend. As you might have guessed I, personally don't agree with that.

Actually, the trend is very heavily correlated to support and resistance areas.  When you see one of these areas being broken, you have a very strong indication of where the trend is headed.

This is something that price action can tell you.  There is no indicator in the world that can substitute that kind of knowledge.

 


 

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