What is Price Action in Forex?
Newbie forex traders are fondly introduced to fundamental and technical analysis trading methods, however, there is a different path which involves using price action to place trades. Price action represents a simple, elegant and direct way to trade, saving traders the stress and confusion of indicators and fundamental data and rather focusing on just one thing – the price itself.
Price action entails technical analysis but without the use of indicators like support and resistance lines, moving averages and the likes. It involves the use of patterns formed by bare prices on charts to determine good trading moves. Price action patterns like consolidating triangles, head-and-shoulders formations, pinbars, inside bars and more, are relatively easy to identify but more tasking is putting price action in an appropriate context or location for a trade.
Worthy of note is that not just any price action pattern is tradable, as newbies commonly fall prey of. The importance of figuring out the right context or location cannot be overemphasized as it prompts many traders to put up indicators like moving averages on their charts in order to identify good context and place consistent winning trades.