Price Action Trading
Price action trading is one of the most common concepts to the traders nowadays. The concept of price action trading embodies the analysis of basic price movement as a methodology for financial speculation.
Price action trading is used by many retail traders and often institutionally where algorithmic trading is not employed. It ignores the fundamental factors of a security and looks primarily at the security’s price history. Though sometimes it considers values derived from that price history, it is a form of technical analysis.
What differentiates it from most forms of technical analysis is that its main focus. Its focus is the relation of a security’s current price to its past prices as opposed to values derived from the price history. This past history includes swing highs and swing lows, trend lines, and support and resistance levels. Price action is simply how prices change and the action of the price.
It is readily observed in markets where liquidity and price volatility are highest, but anything that is bought or sold freely in a market will demonstrate price action. It includes a large part of the methodology employed by floor traders and tape readers. It can also optionally include analysis of volume and level 2 quotes.
The trader watches the relative size, shape, position, development (when viewing the present constant cost) and volume (alternatively) of the bars on an OHLC bar or candle graph. The utilization of value activity examination for budgetary hypothesis doesn’t prohibit the concurrent utilization of different procedures of investigation.
On the other hand, a minimalist price action trader can rely completely on the behavioral interpretation of price action to build a trading strategy. Price action trading is a very deep subject to deal with for any beginner. But it is a very important thing for the traders to have the basic knowledge of price action trading.