Price Action is one of the best tools a trader can have in their trading tool box. Price Action is just looking at what price is doing and what it is telling us. We don’t need to carry a devise when we look a person’s face to see if a person is happy, sad or confused etc. We also don’t need indicators all over our charts to tell us that price is going up, down or sideways. We don’t need indicators or black box systems to show us that price is rejecting a support/resistance line as we can tell by how price behaving if it is respecting a level or not.
This article is going to go over some recent setups and exactly how traders could have used the information that was there for all to see in the raw PRICE only.
The Aud/Jpy 4 hour chart below shows that price is in a nice down trend. Once again we don’t need moving averages and trend lines to see this. We can tell that from left to right price is falling away. A simple horizontal line at a previous swing high shows us that price pulled back twice to this area and gave us two solid Bearish Engulfing Bars that were both very simple and logical trades. These trades form all the time in the Forex market. Both trades could have given about 2:1 risk reward depending on how you played them.
AUD/JPY 4HR CHART:
The next Price Action trade was on the Aud/Chf daily time frame with again another Bearish Engulfing Bar. This pair was in a sustained and very obvious downward spiral. A quick look at the chart tells us that the smart play would be trading in line with the recent down move.
A pullback in this down move to a previous support area and the old price action principle of “old support becomes new resistance” comes into play. Again some nice pips to be made on a very logical setup.
Price did move against the trader momentarily and this just goes to show that in Forex trading discipline is the key along with the patience to just let the market do its thing. Price eventually moved down allowing the trader to take some profits off the table and move their position to break even.
AUD/CHF DAILY CHART:
The last chart I want to highlight is the GBP/CAD which has been a gold mine over the previous few months with price respecting levels continually. The daily chart below shows us the psychological round Number 1.6000. Price could not close above this number and gave us a clear story of rejection. The Bearish Engulfing Bar and Bearish Pin Bar on this chart were big clues to Price Action traders that a reversal was about to take place. This chart had no clear trend direction and when trading markets like these trading away from important levels become even more important. Both trades highlighted on this chart gave the trader more than enough chance to take profit and move their positions to free trades.
Price Action trading is the smart and logical way to trade. Just a few simple principles with some patience and discipline and you too will be on the way to being a consistently profitable trader. All these methods and principles have been around for a long time in all forms of trading.
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