Price Action – Forex Price Action – Price Action Forex Trading

Using price action to trade the forex market is perhaps the most stress-free and effective strategy for analyzing and trading forex. There are many ways in which price action can help and improve your forex trading. This article will discuss some of the ways price action can give you the upper hand against all the masses of traders that are still futilely trading with lagging indicators.

• Price action can positively influence your trading psychology

One of the biggest benefits of using price action to make your trading decisions is that it can have a positive effect on your trading mindset. The mindset of a trader is one of the biggest factors, if not thee biggest factor, that determines whether or not they succeed at forex trading. Price action is a simplistic forex trading strategy, and simplicity is one of the keys to fostering and maintaining an objective market mindset. When you use simple forex price action setups to navigate the forex market you will begin to think about trading in a more simplistic manner and begin to realize that trading is not as technically difficult as most make it out to be. The difficult part of forex lies in maintaining self-discipline enough to not over trade or over leverage one’s trading account, using a simple method like price action allows you to focus more on your self-discipline and less time being confused as a result of your trading strategy.

• Price action provides an accurate and time-tested trading methodology.

Price action trading strategies have been used for centuries to trade financial markets with. Beginning with Japanese rice traders in the 1700’s and continuing throughout the ensuing years, trader’s have been using simple price action trading setups to profit in markets since financial markets existed.

• No more messy and confusing lagging indicators all over your charts.

Not having indicators cluttering up your charts will work to positively influence how you feel about trading the markets and also how you think about them. This is related again to your trading mindset as we discussed above. Just the very act of reducing variables as you analyze the forex market improves your clarity and chances of seeing what is truly happening in the market as a result of price action analysis.

• Price action allows you to trade on your own schedule because it can be applied to any time frame and any market condition.

A powerful feature of forex price action trading is that it can be used on any time frame and in varying market conditions. This gives you the power to trade when you want and how much you want, instead of having to trade on a certain time frame or at a certain time of day. By using price action setups you can trade around your current schedule and therefore you won’t have to drastically alter your life as you trade the forex market.

• Price action encompasses all market variables; price movement reflects the aggregate belief structure of all market participants.

Forex price action trading reduces the need to analyze and interpret fundamental data because all news and economic releases are ultimately reflected via the price action on a price chart. If you can learn to accurately analyze this price action you will also be analyzing the outcome of trader’s reactions to any important economic data. Many trader’s get caught up in a cycle of trying to over-analyze every single piece of market data because they erroneously believe it will give them more insight into possible price direction. What these trader’s fail to realize is that all economic data must pass through the filter of the human brain before it can influence the price of a security. So, if we learn to analyze forex price action correctly there is no need to spend countless hours over-analyzing news and other fundamental data.

The question of what is better, indicators or “naked” indicator-free trading with simple price action setups is something that many traders want to know and a question that often arises in the course of one’s forex trading education. This question might seem to be a complicated one to answer, but it really is quite simple and this article will answer it for you.

Look at the two charts below:

Which one of these two charts contains fewer variables for you to consider, analyze and interpret? It is quite obvious the chart on the bottom does. The chart on the top is the same daily AUDUSD as the chart on the bottom but with numerous lagging indicators added that are some of the more popular ones amongst forex traders. Regardless of what lagging indicators a trader chooses to add to their charts, the fact remains that they are adding variables, thus complicating their trading analysis more than it needs to be.

Lagging indicators such as the ones in the chart on the top simply show price movement in a different format than the actual price bars by themselves. Ask yourself the following question; am I a technical analysis trader? If the answer is yes than ask yourself a second question; is technical analysis the interpretation of price movement over time? The answer to this is yes. Over the years traders and programmers and math whizzes have come up with all sorts of colorful, confusing, and complicated ways to represent price movement over time, with the intention of somehow designing some indicator that would be the holy-grail predictor of future price movement. But, the bottom line is that since technical analysis deals with the analysis of price movement over time it will always be more accurate and logical to interpret raw price action instead of trying to interpret some lagging indicator(s) representation of price movement.

One thing that many indicator-obsessed traders overlook is that price action by itself forms trading signals each day in the forex market. If a trader can learn to interpret this forex price action and use it to make their trading decisions off of they can eliminate the need for trying to interpret multiple lagging indicators as well as eliminate the ugly mess all over their charts that are a result of lagging indicators. The result of trading in this “naked” manner is a stress-free approach to technical analysis that will help you remain objective and level-headed each time you interact with the market. The reason why so many traders give up and fail at forex trading is because they end up moving from one overly complicated indicator-based method to another as each one fails to deliver what it promises. Do you think the trader’s in the pits of the commodity and stock exchanges in Chicago and New York make their trading decisions off lagging indicators? Obviously they don’t, they don’t have time, and they know they are lagging and as a result are pointless, professional pit traders use raw price action to make their trading decisions, because price action is the most up to date and accurate method to trade the market that has ever existed and will ever exist.

A lot of talk is made about the differences between various forex trading strategies floating around the internet. It is not uncommon to read on some websites why rigid forex trading “systems” that eliminate all human discretion are better than methods that require human involvement. The argument these “system” designers make is that by eliminating all human discretion and intellect you will somehow become a profitable trader because you will supposedly also eliminate the emotional mistakes that bring ruin to so many trader’s accounts. The problem with this argument is that it is only partially true, and the part it is true for is not an advantage for any forex trader. Rigid forex trading indicator or software based “systems” only eliminate emotional trading if the trader sticks to the system and does not over-ride it, however they also eliminate discretion and human intellect if they are properly followed as well, and this is not a good thing. Also, most of these systems still require traders to enter their own position size, which means the temptation to over-leverage one’s self is still there.

Financial markets ebb and flow, and the degree to which this happens can vary greatly from one day to the next, therefore, to imply that one can design a forex trading system that returns consistent profits in a robotic fashion with no human discretion or judgement needed, is simply a lie. As any experienced forex trader knows, the forex market can change from calmly drifting in one direction to violently charging in the opposite direction in a very short period of time. These times of intense market movement are when most of the money is on the table for the taking, and they are also the times when skilled discretionary price action forex traders can make a killing while traders that commit to rigid indicator-based trading systems are stuck watching the action unfold without knowing what to do because they have to rely on the crutch of their ineffective trading system.

To be a trained forex price action trader means you do not rely on any indicators, magic bullets, or other non-sense trading schemes designed only for their author’s to profit. What could be more natural or powerful in any financial market than learning how to accurately and efficiently read a naked or indicator-free price chart? Is price movement not the heart and soul of any financial market? It is quite obvious that it is, so the fact that so many traders spend hundreds and thousands of dollars buying trading systems that propose to analyze price movement through some alternative method to simple price action analysis of a naked price chart is quite puzzling.

As an aspiring forex trader or an experienced but frustrated one, you have come across this page on your search for a profitable forex trading strategy. Only you can decide if you want to walk down the path of complicated, cluttered, and confusing lagging indicators and trading “robots” which simply mask the true price dynamics of the price chart beneath, or take the route of learning to trade off simple price action strategies which make use of nothing but a price chart, support and resistance, and retracements. The difficulty of successful forex trading lies not in the strategy you decide to implement, but in the way you think about and behave in the market. If you can learn to be a disciplined trader that thinks and trades in a simplistic manner, such as results from learning to trade with price action, you will find your path to trading success will be much more pleasant and smooth than taking the bumpy and overly-complicated road of trying to trade off indicators and software programs.

A trader’s mindset is typically the most important factor in determining whether or not they succeed in the forex currency markets. This mindset can be influenced heavily by the type of trading strategy a trader uses each day to navigate the forex world. Logic would predict that a trading strategy that is too complicated would have the effect of confusing and frustrating a trader to the point of actually inducing emotional trading. Indeed, that is just want most trading strategies for sale on the internet today do; confuse and frustrate traders and produce emotional trading errors that cause many traders to blow out multiple trading accounts.

• Price Action can Help

What many trader’s do not realize or that they fail to figure out is that the particular trading strategy they implement on a day to day basis to make their forex trading decisions is not nearly as important as obtaining and maintaining the proper forex trading mindset. This mindset cannot be obtained or maintained when you are flustered every time you try to trade the market because the method you are using is so complicated and hard to trade with. Many traders think that by trading with numerous lagging indicators all over their charts they are somehow gaining an upper hand in the market or some other kind of advantage. This could not be further from the truth and using such lagging indicators usually only contributes to indecision and second guessing oneself.

What is needed to foster a simple and clear forex trading mindset is a simple and clear forex trading strategy like price action analysis. By learning to trade the forex market off simple price formations that occur each day in the market one can learn to see the market in a simple and “stripped” down perspective. This simple trading perspective will work to simplify your mindset and this will allow you to behave in a much more calm and collected manner in the forex market.

Price action trading strategies have been around for centuries, and this is no coincidence, professional traders know that learning to read a simple price chart with no other fancy “magic bullets” is all that is required, strategy-wise to profit consistently. The other crucial factors to profiting consistently in the market is healthy dose of self discipline and having a trading plan. All of these items connect with each other and contribute to the success of a forex trader; a trader needs to have enough self-discipline to stick to an effective forex trading plan that is designed around a simple method like forex price action which will make it easier for the trader to maintain their discipline each day in the market. So, we can see this is like a circular loop of positively reinforcing trading habits:

Beginning forex traders interested in price action trading understandably want to know where they can learn to trade the forex market with price action. There are a number of websites on the internet that contain information on price action trading, however there fewer websites that are solely dedicated to teaching traders how to trade forex with price action.

Some of the things you want to see in a high quality forex price action education website are things like:

• Website is designed and maintained by a real forex price action trader who successfully practices what they teach.

• Plenty of instructional mediums; videos, articles, market commentary, trader’s forum, and customer support should all be included in any serious forex price action website that is truly dedicated to helping trader’s learn to trade with price action.

• Well designed and user friendly website; you will notice most forex educational websites can be somewhat cluttered and difficult to navigate, this only detracts from the enjoyment and quality of your learning and is not necessary to deal with when there are alternatives.

• A comprehensive forex trading course that encompasses all the price action trading strategies the educator teaches in one convenient package.

These are just some of the features that high quality forex price action educational website should contain; it is by no means an all-inclusive list, but any price action training website should contain the above traits.

Do Forex Price Action Trading Strategies take a long time to learn?

Forex price action trading strategies are one of the simplest and most enjoyable ways to trade the market. Actually digesting and learning how price action setups work and what they mean is not difficult by itself. What is a bit more difficult is learning when to trade a price action setup and when to sit on your hands. Many traders have a problem with over-trading, no matter what trading strategy they use, there are always ways to “manifest” a trading signal even if one is not actually present. This is the real danger of forex trading, and most people don’t even realize when they are doing it.

Price action trading success depends on sharpening your sense of trading discretion so that you only take the highest probability setups. The best way to develop your trading discretion is to demo trade for a period of at least 3 months or until you are beginning to see consistent profits each month. Professional forex price action traders typically trade less than what the general public might think. This is because professional traders know that the best setups form on the higher time frame charts like the 4hr, daily, and weekly. To get caught up trying to “day trade” on 30 minute and lower charts is almost always a fool’s game and typically results in a casino-type attitude in traders instead of the business-type attitude that is necessary to find success with forex price action strategies or with any trading strategy for that matter.

When considering trading the forex market it is important that you know what strategy you are going to employ before you start trading real money. Trading the forex market with price action strategies can be a very effective and efficient way to make your trading decisions. When you understand how forex price action works, you put yourself in the very powerful position of being able to accurately read a “naked” or indicator-free price chart. Having the knowledge to read a price action forex chart will also give you the power to read price charts in any financial market, not just forex, should you decide to do so.

By using price action setups to trade the forex market you will effectively be basing all of your trading decisions off of a simple and clear trading mindset because the simplicity of forex price action trading will permeate throughout all of your trading activities. Many beginning and experienced forex traders alike get caught up with trying to trade overly-complicated trading systems that seem effective on the surface but in the end bring nothing but struggle, lost time, and lost money. If you are aware of this fact before you get to deep into forex trading you can prevent yourself from falling into this common trap of trying to use overly-complicated trading systems by employing a simple yet very effective strategy like forex price action trading strategies.

Price action forex trading will provide you with high probability trade setups that can help you time your entries into the market much better and more accurately than most lagging indicator methods can. This is because you are getting the trade setups as they develop instead of trying to interpret some indicator’s depiction of past price movement. Many of the forex price action trading setups that various price action mentors teach are simple 1, 2, or 3 bar setups that can be entered immediately after the price bar closes out. This means you have the potential to enter the market as close to a turning point or trend resumption point as possible, granted there is some discretion involved and any strategy will always experience losing trades including price action trading; however, if you become a good discretionary forex price action trader there really is no more accurate trading strategy in existence.

To effectively learn to use forex price action trading on an on-going basis it is a good idea to enlist the help of a price action trading mentor or some other experienced forex price action trader you may know. The discretionary aspect of price action forex trading is something that is easiest to learn from someone that has already mastered it; otherwise you might have to endure a lengthy period of trial and error. If you stick to simple yet effective forex trading strategies like forex price action trading, you will give yourself an excellent chance at experiencing a much more streamlined and profitable career as a forex trader now and into the future.

How Price Action Can Improve Your Forex Trading

If you are new to price action trading and haven’t tried trading off a pure indicator-free price chart before than you are in for a big awakening. Once you develop a keen eye for a few specific price action setups you will wonder how you ever traded with any other method. It only makes logical sense to use price data to make your trading decisions since the forex market is simply a stage for the determination of currency prices. Getting caught up using indicators and over-analyzing economic reports is a loser’s game since the the forex market is driven off trader psychology, just like all markets are. Sure economic reports provide the catalyst for movement, but often times the market reacts opposite to what the report would suggest. The bottom line is that all you really need, method wise, to trade forex effectively is the data that any raw price chart already supplies to you, and you can learn to accurately make trading decisions by learning to use price action setups on a raw price chart.

Using price action as your trading strategy will bring clarity and peace of mind to your interactions with the forex market. This will have a direct effect on your bottom line by keeping you in a more stable emotional state while trading the forex currency market. Psychology is probably the most important factor in long-term forex success, having an effective yet uncomplicated and highly adaptable trading method is one of the most significant things you can do to directly influence your trading psychology. Price action analysis is one of the few methods that fit into the classification of simple, effective, and adaptable, learning how to spot reliable price action setups is one of the best things you can do to improve your forex trading.

Traders who have been mentored or trained in the art of price action analysis have obtained a skill that will never lose relevance or fade over time. Price action trading strategies can be used to develop and solidify a trader’s market discipline because the better formed setups that occur at confluent levels will naturally be more accurate. After learning a few solid setups we can hone our discipline by waiting patiently for them to form and then striking with precision. Learning to wait for the best price action setups will improve your winning percentage as well as build your trading account much faster. All trading methods will encounter losing periods; most methods give you little control over which setups you will take and which you will not take however. An indicator based entry will either tell you to enter or not enter and will not leave any discretion up to you. Yet it is often this ability to use discretion wisely that separates the professional forex traders from the amateurs.

The simplicity of employing price action setups into your forex trading plan will have a permeating affect on all aspects of your forex trading in that will influence a clear and logical approach to your trading strategies,  psychology, money management, and self-discipline. Click here to heck out some excellent price action videos.