Few things are more important in the context of the ETF trading business than the price action. Price action comprises the technical body of the exchange industry. People who sign up for trading mostly find the concept hard to comprehend. But with perseverance and interminable focus, anybody can internalize it with time.
This article will discuss the core of the price action strategy. It will give the readers a streamlined definition of various aspects of the trading price action strategy.
What is Price Action Strategy?
Price action is a form of financial speculation. It contains different price movements’ analyses in contrast to a time range. Retail and hedge-fund traders in Singapore extract necessary information from such studies and employ them to forecast the future course of prices.
Simply put, price action is all about how price changes. A trader can ignore to follow it if the market he is working in is a stable and unfluctuating one. But traders of highly volatile business ground have no reason for not keeping an eye on price action.
Price Action Strategy
Analyses draw different types of price-action patterns in charts or graphs. These patterns are the most crucial facet of price-action trading as they help an observer outline the future market structure. Read more about future trading and price action trading method to become a better trader.
Here are a few major price action strategies that Forex traders generally exploit.
1. Inside Bar
Within a chart, inside bar patterns are represented with two bars. One bar is termed as the inside bar, and the other one is the mother bar. The minimum and the maximum range of the mother bar sets the limit for the inside bar.
In any trending market, business people leverage this pattern like a breakout pattern. However, if inside bar patterns form as a prime chart level, investors can trade them as reversal signals.
2. Outside Bar
Like the inside bar patterns, outside bar patterns are also two bar patterns. The outside bar engulfs or overshadows the other bar. The pattern is more familiar as a bearish or bullish engulfing pattern.
3. Pin Bar
This pattern contains a single candlestick, which shows price decline and market reversal. It is most effective in a bearish environment and range-bound market. Investors can also trade signals from pin bars in the counter-trend situation with a level of resistance or support.
These signals imply the probable opposite direction that price movements can go. The end of the pin bar depicts price rejection and a reversal.
4. Fakey Pattern
It consists of an inside bar’s false breakout. When closes and reverses turn back in the range of a mother bar or an inside bar, and the inside bar pattern breaks out immediately, it makes a fakey.
Fakey can fake anyone out, and that is the reason it takes this name. It will create a vibe that the market is about to break, and then suddenly it turns back to the game.
Dealing with Price Action Pattern
One should not only take care of signals but also, he should be aware of the place where they form in the charts. Different patterns show a different picture of the market. Analyzing the signs and their sources, Forex traders should determine their entry and closing points.
Ideal price action indicators establish at the market’s confluent point. Traders must look for the places in the charts where the entry becomes more favorable, and a couple of helpful things get aligned with the industry.
These other favorite things are the elements of risk and money management procedure. Traders will learn about them by passing sufficient time in the industry. There are other resources and articles where such factors have been discussed broadly.
This is not an in-depth approach to price action strategy. But enough to learn the basics about them. Each of these patterns should be studied broadly, and the trading strategy should be internalized with repeated and deliberate practice.