10 Reasons Why Price Action Will improve Your Forex Trading
10. Price action analysis provides traders with an ever-relevant market perspective.
The fundamentals of price action analysis are not something that fade away with time or that can become irrelevant through wide-spread usage. One of the best reasons to start using price action as your main trading method is that the analysis of price action setups gives you a way to make sense out of market movement; it allows you to put price data into a context that makes logical sense. Traders often get caught up using indicators to analyze price movement, this is like going to a mechanic if you are feeling sick, it just doesn’t make sense to look at a lagging price indicator to analyze price movement when there are regularly repeating price action setups that can give you a much better expectation of what price is likely to do next.
9. Price action analysis is a time tested strategy.
Trading based on specific price action setups has been used by professional traders for decades. When you learn to trade using price action analysis you can rest assured that your method is relevant because it teaches you to decipher the core workings of any market; price movement. Many traders get caught up in using different combinations of lagging indicators, these methods often have not been used for long periods of time by many other traders due to their ineffectiveness to adapt to ever-changing market conditions. Price action analysis is always relevant and is flexible enough to give you insight into market direction under any circumstances.
8. Price action analysis works great in trending or range-bound conditions.
One of the great things about price action analysis is that it provides relevant and profitable signals in both trending and range-bound markets. Many trading methods work well in trending markets but cease to work in trading ranges, or vice versa. An exceptional and flexible trading method will provide consistently profitable signals in any market condition.
7. Price action setups are easy to test on demo accounts.
Price action setups occur frequently in the forex market and are easy to spot once you are trained to know exactly what to look for. There is no need to sit and try to figure out what three different indicators are telling you to do. You simply wait for your desired price setup to form and then execute your edge. The forex market has widely accessible demo accounts that you can practice price action setups on before going live.
6. Price action analysis factors in all market variables.
The analysis of price movement via price action setups is really the only method you need to build your trading plan around. Often times traders get caught up trying to trade the news combined with their overly complicated multiple indicator method. The beauty of price action analysis is that it gives you a visual representation of the only thing that matters when it comes to news releases; namely traders’ reactions to the news. Price will often go the opposite way of what people may expect based on a certain news release. If you know how to analyze price action you probably would have been tipped off to the most likely direction of the market before the news even came out. Price action simplifies your mindset by including all market variables and giving you an easy way to make sense of them.
5. Clearly defined entries.
Once you learn a few solid price action setups you will know exactly what you are looking for in the market before you enter a trade. There is no guessing like with other methods; either your setup is there or it isn’t. Many forex trading methods have large grey areas that leave traders wondering if they should jump in or not. This often leads to over or under trading, blown out trading accounts, and missed opportunities. When you learn to trade using price action it will be like you can see the market clearly for the first time, no more foggy methods that leave your head hurting.
4. Allows for profitable use of higher time frames.
Another great thing about price action setups is that they usually become stronger and more valid the higher the time frame you trade. This allows you to trade less frequently but with more accuracy. Sitting in front of a computer screen for multiple hours watching a 5 minute chart can be maddening as well as extremely detrimental to your trading account. Many traders get wrapped up with thinking they give themselves some sort of advantage by trading more frequently or on lower time frames. All this ultimately does is cause you to lose money and lose precious time you could be spending with your friends and family. When you know how to use price action setups effectively you can trade strictly off daily charts and spend about 30 minutes a day analyzing the forex market for trade setups. Once you have a well defined and profitable trading plan built around price action, spending increasing amounts of time looking at your charts and small time frames is only going to hurt you. The reason most people get into trading is because they don’t like spending massive amounts of time at a job they hate. Many of these same people end up forgetting that one of the best things about trading is that you don’t need to spend a lot of time analyzing the market, just enough to spot your edge then you walk away and let it play out.
3. Price action trading is the closest thing to what floor traders in the pits use.
We have seen the images of screaming pit traders on the floor of various exchanges in Chicago or New York. Do you think they are using lagging indicators to make their decisions? Thinking about lagging indicators in that perspective actually allows you to see how comical it is to trade using them. Pit traders read tape, meaning they watch the actual price numbers for whatever market they are trading and analyze their movement. Price action analysis is the most analogous method to tape reading that a retail forex trader has at his or her disposal. The reason pit traders analyze price movement by reading tape is because this is the core information of the market, just like price action analysis setups. It is comical at best that so many people fall into the trap of lagging indicators and trying to predict the market movement resulting from every economic release.
2. Price action analysis helps you maintain an objective market mindset.
When you know exactly what are you looking for before entering a trade you don’t become frustrated or confused. You just wait and remain calm, observing the market at your regularly scheduled trading time to see if your edge is present. By not getting caught up trying to decide if your method is giving you a valid signal or not you remain cool and collected and give yourself the best shot at profiting. Just like a lion in the wild as a price action trader you sit and wait for your perfect price setup to form and then pounce on it.
1. Price action analysis helps you achieve the discipline required to excel at forex trading.
Discipline is perhaps the most important ingredient to long term trading success. When you have a simple yet effective and flexible method you can concentrate more on the psychological aspect of managing your own emotions while trading. Emotion management and self-discipline are by far the most important factors that separate professional traders from amateurs. Many traders get so caught up in fine tuning their method or in finding the “holy grail” that they end up forgetting the real meat of trading success is right between their ears. How you react to winning and losing trades is much more important than the method you employ. The best thing about price action analysis is that it allows you to concentrate on yourself because you have no need to worry whether or not your method is effective. To learn how to use price action to trade the forex market check out my forex trading course.
Nial Fuller is considered a leading ‘Authority’ on Price Action Forex trading strategies. If you want to learn more about harnessing the power and simplicity of Price Action Trading Strategies please visit Nial Fuller’s Forex Trading Course & Traders Community Page Here. Nial’s Students get lifetime access to all of his advanced price action Forex Courses, video lessons, webinar tutorials, daily trade setups newsletter, live trade setups discussion forum, traders support line & free ongoing course updates. For more information visit the Forex Course page here.
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10 Comments Leave a Comment
THank you somuch Nial.
Always good information
thax price action indeed helps to reduce pressure and brings desciline because a trader just need to figure out when to enter a position than over trading
Nial – I haven’t been trading very long and have tried many different techniques with varying levels of results. I would like to learn mor about your price action strategy, but before putting up more $ for something I don’t really understand, can you kindly point me towards some succinct videos on your website that really DEFINE what you mean by Price Action?
Hi check here..
A great set of articles Nail especially this one, it has helped me make up my mind to become a member. I have been doing it all wrong so far it’s now time to do it right!
Wish you all the best and keep up the good work Nial. A big thank you from me too.
Great job Nail, reading this just the day i decided to join, making my decision (to become member)more valid.
Hi and thanks!
I enjoy reading your posts and have been meaning to tell you so here is a late Thanks! You have a lifetime reader here.