What is Price Action in Forex?
Forex trading is thrilling, although it can require an incredible amount of strategy and indicators in order to turn a profit. Typically, price action means that traders are able to carry out an extensive range of technical analysis functions, without the need for any indicators. This type of technical analysis is focused on the past prices which have been traded in the market.
The reason that this type of trading has proven to be quite successful lies in the fact that price movements tend to be repetitive. Taking this into consideration, the first question is, “What is price action in Forex?” The response is simple, in that within Forex markets, price action makes markets fairly predictable. This means that Forex price action formations will repeat themselves over time, and can be a tool that could be used to predict the price direction in the future.
Understanding Price Movement in Forex
There are several factors that affect the way that price moves in Forex trading. These factors include the interest rate and balance of payments. From a broader perspective, there is the trade deficit as well as the economic policy of a country. Also essential to note are political factors, the employment rate and health of the economy.
Making use of Forex Price Action
For the most part, a Forex trading strategy requires a price chart, and this should then be used to make basic calculated decisions. Include price action in this strategy, and the types of entries made in the market could become highly accurate; making it easier to achieve a profitable trade. Forex price action identifies hot spots within the market. These hot spots include resistance levels, as well as core and dynamic support.
Advantages of Price Action in Forex
An advantage of using price action trading as a Forex trading strategy is that it can be used at all times. Many traders who start to explore Forex trading will make use of Forex robots as well as Forex indicators, believing them to be the key to success. However, there is no better source of information than historical information, which is why price action is so powerful as a strategy.
Furthermore, with price action, a trader is able to trade using highly relevant information that is accurate as it applies to ongoing market conditions. Using price action, it is also quite easy to identify opportunities, which is why this trading technique continues to be so highly favored.
For Forex traders who are looking for a strategy that will not fail them, (though there is never a 100% accurate strategy), price action should be at the top of the list. Using this strategy, it is possible to create a plan for the long term, and price action has a proven track record of success. The last deciding factor in favor of price action is that it is very simple and can be used when you are looking at emerging and trending markets. When you want to trade against the trend, using price action could help you make brilliant decisions.