Rates for financial instruments such as shares, currency pairs or commodities are very necessary when you decide to go into the field of trading CFDs. With their respective rates in the market, a trader also needs to be aware that the fluctuation of the instruments’ market rate is the key element that is used to determine a winning or a losing contract. Thus, it is necessary for traders to apply and develop price action strategies in order to have a highly profitable account.
What is price action trading?
It is a trading method designed for financial markets which uses pure price and change in price as a basis for placing positions when trading. Just like other strategies, price action trading requires analysis of patterns. Moreover, this type of trade is suitable for a short term trade including day trades and swing trades. One great advantage of this technique is the fact that it is flexible. Thus, it means that this can be used when trading CFDs and other trading instruments in any situation.
How is price action applied in trading?
Price action principle is applied into trading with the use of indicators. These indicators are called action indicators because it shows actions of all buyers and sellers who are actively involved in a given market.
What is a candlestick indicator?
This is an indicator which requires a trader to analyze candle charts. Candle charts are tools used for price action traders to see a daily chart of a security. Candles represent a full day’s worth of trading.
What are the main things to consider before deciding to use Price Action Strategy?
Before deciding to use this strategy in your transactions, you have to consider asking why,how and what. Why do you think of being involved in a specific market or markets? How do you plan to trade? How much price levels for entry can you afford? Will you use your stop-loss and what exactly is your target? What is the possible outcome of your trade? Will you go for a long term or short term trade?
What are other indicators of Price Action Strategy?
Other indicators involve the hammer, the shooting star, The Harami.
What is The Hammer Indicator?
This is a pattern that is shaped like a hammer. It is a bullish market signal which illustrates a great possibility of a market to go higher than go lower.
What is a Shooting Star Signal?
A shooting star signal is a bearish market indicator which depicts a great chance of the market to move lower than higher. This signal is used in downtrending markets because this signal is technically the opposite of the hammer indicator.
How is Harami different from the other patterns?
Harami is a distinct pattern because it uses two candle patterns. Being used in a breakout trading, these candles show market indecisions.
With its flexibility in application to different trades, we can say that Price Action trading is something that a trader must master.