What is Forex Price Action Trading?

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Price Action is everything that price is doing on any trading instrument, being represented on a chart for a trader to see.

In very basic terms Price Action illustrates in a way that a trader can see exactly on a chart, what a certain pair did for a particular time frame. For example; the individual candlesticks or bars will show how high the pair went, how low the pair went and also the open and closing prices. Most charting platforms can produce candlesticks and bars for time frames varying from one minute to one month.

Another way to think about it is, Price Action is everything humans are doing and how they are trading, shown in a chart form.

This basic explanation of Price Action is not subjective. What I see on my chart is exactly what another trader will see on their chart, providing they are using the same charting equipment. 

The next question is the important question. How can we use Price Action trading to profit? Humans are very habitual. Traders tend to do the same things and react the same way over and over again when presented with similar circumstances.

Although if the same two traders have the same charts they will see the same Price Action that does not mean the same two Traders will come to the same conclusion. In this way Price Action can be interpreted by the individual depending on how they understand different Price Action formations.

If you have watched the charts previously you may have noticed that the same patterns, most of the time, repeat themselves. This is once again because humans are habitual and react the same way given very similar circumstances.

So if we can notice these patterns and human trading habits in the markets, we can start to find a trading strategy and implement it, to make money off the other traders, while they carry out their normal trading patterns.

These patterns will continue repeating themselves as long as human’s trade. Like I said, humans are very habitual and most of the time they repeat themselves, over again given similar circumstances.

 

What is Needed to Trade Price Action?

Clean Charts

Price Action is best seen and traded from clean charts. To trade Price Action we don’t need fancy indicators or anything at all except for a clean chart. Many traders fall into the trap of thinking the more indicators they have on the charts the better chance they have of predicting where price will go. This is just plain wrong. Indicators just confuse what doesn’t need to be a confusing process. Everything a trader needs to know can be seen from just the raw price chart. Take everything off your chart including ALL your indicators and rubbish and leave just your price. This all all you need to trade price action.

 

Solid Method

Trading Price Action in the Forex market is the best way to consistently predict movement. For a trader to do this however they need a strong method and skills to trade with. Learning through a course such as Forex School Online Advanced Price Action Course will give traders the skills and understanding they need to trade effectively. Learning through a course will give you the guidance you need and also shorten your learning time. In our course we discuss everything you will need to know about price action trading right from what trades to look for and how to enter them, all the way through to money management and profit taking. You can join our price action course HERE our if you have questions you can contact us HERE.

 

Continual Education and Practise

Trading the Forex markets with Price Action is a skill that takes continual practise. The Forex markets are continually doing new and different things and all traders from the beginner to the advanced can continue to learn by trading and watching Price Action through their charts. The best charts to trade the Forex markets with are the New York close charts. Forex does not have an official centralised market centre like other markets such as stocks do. The New York close is looked upon as the unofficial market close for the Forex market. You can read more about the charts we use and also download a free demo charting platform for your price action analysis here: New York Close MT4 Charts Demo

 

An Edge on The Market

A trading edge is something that gives a trader a statistical advantage of being profitable over a sample size of trades. The edge for a Price Action Trader is their Price Action signals and trade management. Forex School Online teaches its members how to trade low risk with high reward setups, using solid Price Action formations that form in the markets time and time again. Without an edge a trader may as well just flip a coin because even a coin toss should average out to 50/50.

 

Powerful Price Action Setups & Putting it All Together

Price Action traders use signals that price gives them to make strategic trades so that they can profit. Price action traders have many things they have to take into account when looking to take a trade such as the current trend, if price is in a range or boxing, if price is breaking out or consolidating, if price is reversing etc Some of the best setups price action setups price action traders can take and also some of the most powerful are known as reversal setups. Two well-known reversal setups are the Engulfing Bar setup and the Pin Bar setup. You can find in depth tutorials on these setups here: Pin Bar Forex Lesson - Engulfing Bar Lesson

To put it all together, price action traders must understand the markets key structures and the many patters and rules that the markets adhere to. The market is a repetitive beast and tends to follow the same patterns over and over again. The smart traders who realises these key patterns can adapt and profit from them. Trading with the trend is a SUPER important factor for price action traders and a huge edge they can have in their favour, rather than trying to trade against all the momentum.

Trading can be very rewarding and profitable endeavour if the Trader knows how to trade using solid Price Action techniques. Trading with Price Action allows the Trader more flexibility and a lot less stress than the Trader who trades with so many indicators they get confused. In Forex trading less is more. Less confusion and less overcomplicating things lead to more success and ultimately more profit. I hope you enjoyed this article and look forward to talking to you soon in the member’s forum.

 

Other Key Lessons & Tutorials 

- Support and Resistance – The Key to Price Action Trading

- Price Action Signals To Avoid

- Price Action Guide to How the Market Moves

- Reading Price Action with Order Flow

- How the Professional Hunt Stops

- Trend Trading Price Action – An in Depth Tutorial

 

What is Forex Price Action Trading? was last modified: October 12th, 2014 by Johnathon Fox

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About Johnathon Fox

Johnathon Fox is a professional trader who is widely known as the ‘Master’ at all things Price Action Trading. Johnathon acts a tutor and mentor to many aspiring traders world wide and specialises in helping them realise their full potential as traders. To learn more about how you can become one of Johnathon’s students and begin learning the correct way to master Price Action with a Lifetime membership view here: Forex School Online Trading Course.

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