Have you read this title so far? If yes, we really appreciate you.
And… If your answer is NO, then listen, it’s the beginning to give you something extraordinary.
We’re now sharing 7 SUPER effective price action trading tips that’ll make the wholesome trading journey even easier. Therefore, let’s get going already, shall we?
Tips 1 > Prefer Multi Candle Patterns
When it comes to the reliability of candlestick patterns, pursuing more patterns over a single one might be the ideal choice as it has been proven several times. Therefore, using 3 patterns instead of using one would bring BETTER results.
An example to sort things out:
Have you guessed the charting pattern yet?
Well, in case you didn’t, it’s known as the “Head and Shoulder” pattern which is probably a GO-TO trading indicator for numerous retail traders.
Apart from that, you should also prefer using top tiers indicators like the double top, bottom, and cup & handle. Wondering why you should prefer them over other indicators?
Simple! These indicators deliver consistency while opening high probability trades. However, that doesn’t mean the other indicators are flawed or ineffective, they just lack consistency.
After all, the term consistency matters the most when it comes to online trading.
Tips 2 > Don’t rush, Wait For Confirmations of Price Action Trading
Theoretically, waiting for confirmations means entering the trading market with 100% consciousness, not the other way around. As per PRO market traders, opening trades after the patterns get completed is always the IDEAL move because in that way you’ll get a proper follow-through of the market.
That being said, we’ll strongly recommend you to enter at a little bit above or below until you’re completely watched up with the market movements. This will come in handy IMMENSELY when the market reverses on you as you’ll be prepared to fight that worst-case scenario HEAD on.
Besides, if you’re possessed with a bad habit of entering trades before the pattern completes then you should try to avoid that habit as it can cost you a whole lot.
We mean, it’s quite obvious that you may face temptations over time when the patterns undergo their last stage but stick that in mind that the market can reverse on you anytime while leaving you with devastating outcomes instead of fruitful ones.
Therefore waiting a bit should be the ultimate weapon of your toolbox. Makes total sense, right? Here is a GBP/CAD trading chart that will give you the answer to why you should wait a bit before making the calls.
Tips 3 > Place Your Stop Loss And Enjoy Every Bit
Placing an order or simply opening a couple of trades is only considered as half of the picture when it comes to online Forex trading. The real question lies, “where should you really place your stop loss?”
Despite the fact that the Foreign exchange market is probably the most volatile market that exists in current times, fixed pips stop loss initiatives are hardly effective.
Hold that thought, today I’ll be showing you just how you can place stop losses at the exact point. Just like a BOSS, you see!
When It’s Above The Price Action
In our opinion, this is by far the easiest approach that you should roll with. In this likely scenario, after seeing a price action pattern, take the high position while adding a few pips (+5 should be enough here) and finally put your stop loss.
Note: There might often come drawbacks while using this strategy which obviously will depend on the charting pattern you would be using. Besides, a BIG stop loss means smaller R: R as a reason the risk that’ll come with the strategy should also be taken into consideration.
When It’s Halfway The Price Action
When the pattern is so large that it’s realistically not possible to put your stop loss above the pattern, this could be another option. This approach will come in handy when the pattern is usually too big. Besides, you may have already encountered them with pin bars containing long wicks.
Though it’s even riskier than the process We’ve to share before as it’s a mere possibility and haunches, nothing else. But when you take the R: R term into consideration, it’s not bad of an approach, right?
Tips 4 > Look For “Confluence” All The Time
Confluence is literally everything. It’s one of the most PROMINENT tips that you must know about, at any cost. Let’s be a bit idealistic here,
So, the best-case scenario is that you’ve found a juicy setup for price action trading. Bravo! Therefore, make sure that it has a confluence so that the strategy can get along with diverse signals that’ll eventually support your visionary setup.
Here are some triple top and high confluences that you should be aiming for:
– The RSI (when it faces divergence)
– The Fibonacci (the pattern often occur at retracement levels)
– The pivot point (the pattern often occur at pivot points)
Moral: The more confluence you’ve on your sleeve, the BETTER the price action setup gets.
Tips 5 > Find Out The Major Inflection Points
First of all, what are inflection points in price action trading? Simply put, the major inflection points are specifically diverse fundamental behaviors of the market price movement. And… yes. We’re talking about the giant spikes that indicate rejection of market price movement. This is usually the place where the big market moves happen not overnight though.
Looking at the following chart, the points (price areas) are quite important as numerous buyers and sellers are opting to find them 24/7. Besides, a lot of traders will put their stop losses and entry points in these areas. Therefore, you better look for them while you can. But how exactly?
Here’s an example just for you:
Specifically, you should be looking for:
– Influential spikes
– A lot of suspicious activities
– On major turning points
So, start looking for the next BIG market spikes already!
Tips 6 > Recognize Support And Resistance Zones ASAP
Support and resistance ( aka S&R in short ) are the two most familiar terms that are used to define the lowest market price point aka support, likewise, resistance stands for the highest market price point.
Needless to say, these price areas get tested too often by the retail market traders as they are simultaneously looking for certain activities in these points.
Note: Support and resistance don’t often occur as thin lines rather it represents Arial zones.
So, first of all, the green rectangles (stretched out ones) symbolizes support and resistance zones. To be more specific, the support zones are indicating lower market levels on the other hand the resistance zones are indicating higher market levels.
Note: The position of zones is not ABSOLUTE as it can switch places depending on the market movements.
Trending Support And Resistance
While we are at it, it’s worth mentioning that the support and resistance levels are not only cut out to be horizontal instead the shape may differ.
From the chart, it’s clearly visible that a rising channel has been formed here through the lower and upper boundaries. Besides, the price moves somewhere along the line but eventually returns to its former state. Moreover, these aren’t actual boundaries rather more like zones.
Dynamic Support And Resistance
Anyways, dynamic lines can also be used while signifying support and resistance zones, for example, it can be executed using Bollinger bands or moving average trading indicators.
Undoubtedly, it can be said that the support and resistance zones are indeed quite significant when it comes to increasing the market’s activities. As a result, the price reacts to Arial zones while giving us opportunities to enter the market.
Tips 7 > Remember! Context Matters
Calculating the exact position where price action will appear, you’ll have to judge each of them individually. As for the reason, the same bar appearing in the price action can both be bearish as well as bullish and which obviously depends on the position. However, not all the bars are not worth implementing if they appear at the same levels along with other significant bars. Feeling a bit dizzy?
Why don’t you look at the chart instead then you’ll know exactly what I mean. As we can see, there are several pin bars resting upwards of the chart but they don’t carry much weight. Why?
The market levels are not effective and that’s why the significance of the pin bars stated there loses their value. Also, if you look precisely then you’ll eventually see that instead of causing a market reversal the pin bars are causing higher price grinding.
Due to this exact reason, contexts are the top priority when it comes to price action trading.
Final Thoughts of Price Action Trading
If we have to simply draw a conclusion regarding “price action”, it won’t really feel complete as there are vast aspects to discuss. Also, there are numerous misconceptions about price action that you should be aware of.
Some of them will sound exactly like this:
- Price action ensures a 100% success rate.
- Price action is a cover-up of Forex scams.
- It is SUPER easy to learn.
- Price action is only compatible with Forex trading.
And… All of these are myths that are continuously trying to defame the price action indicators. So, watch out for them, will you?
Besides, the learning process of price action is likely a long one but once you get a hold of it, it pays off!
So, ready to reach new heights in the financial markets with price action?
Brace yourselves then!