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  1. #1
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    Price action basics. Part 3

    Hello again.

    let's contiunue our studies about price action and how to use it.
    See previous posts here:

    Price action basics. Part 1
    Price action basics. Part 2

    As you might notice, I'm not suggesting to simply FOLLOW PRICE, but I suggest you to rely on MARKET LOGICS.


    Why not to simply follow price action?


    Price is simply the advertising mechanism and in most cases it can be misleading.

    "Should you accept this breakout", "should you fade this market" and so on and so forth. Price itself will not give you clues for that. You have to analyse fragile equilibrium between price and value to get answers on these questions.


    What is Value?


    It can be called area of aсceptance - area that market will more likely revisit or stay near that area for some time. Trading markets, you should rely on fundamental market principles.

    And of of them claims:

    "The goal of the marketplace is to faciliate trading"

    If you think about this principle, you will understand that market needs liquidity to facilitate trading. By "liquidity" I don't mean single buyer that steps in and kicks the price.

    By liquidity I mean plenty of players with different perspectives, participating near given price level. If you have that pluralism in opinions, you have value area.

    If liquidity is not enough, market auctions higher or lower to find it. Guess, how it attracts liquidity? Of course, it offers higher or lower price - nothing is new.
    That's how market auction works.



    There are 2 basic types of price action if we look at it from "price-value" perspective.

    I will use the simpliest way to vizualize value on market - moving average. Of course, it's not that simple in reality, but it would be enough to show you how it works.


    1. Value is leading, price is following.

    For example, it occurs when value is lower. Market accepts lower prices and rejects higher prices, yet it has scanned higher prices for liquidity.

    You might notice that value is going sideways.

    In this case market has no reasons to immediately leave this value area. You may expect some rotation before something happens.

    Attachment 968


    2. Price is leading, value is following

    In this case you may notice, that price runs away from value, there's often a gap between price and value, and this is an indication of strong imbalance - sellers are in control and it's better to trade in sync with them.


    Attachment 969


    to be continued...

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    Last edited by Value trader; 09-02-2013 at 11:11 AM.

  2. #751
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    They not always play long term.One think i highly agree with is that we need to identify the true trend in order to trade in its direction and keep our trading profitable. I do not think it is proper advise which technique/indicator to use to find out about the trend or momentum, different traders may have their own way which they are comfortable with and which works for them.

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  3. #752
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    Quote Originally Posted by qaiser1 View Post
    They not always play long term.One think i highly agree with is that we need to identify the true trend in order to trade in its direction and keep our trading profitable. I do not think it is proper advise which technique/indicator to use to find out about the trend or momentum, different traders may have their own way which they are comfortable with and which works for them.
    When a true trend is identified with you analytical skills, you are in a position to bag big profits. I think the best strategy to earn in Forex is nothing but the price action. In price action the main focus is on studying the candles and the movement in the currency prices. Trading with a non understood strategy will be dangerous.

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  4. #753
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    Quote Originally Posted by Bhave4U View Post
    When a true trend is identified with you analytical skills, you are in a position to bag big profits. I think the best strategy to earn in Forex is nothing but the price action. In price action the main focus is on studying the candles and the movement in the currency prices. Trading with a non understood strategy will be dangerous.
    When we are in with a good trend, we should make a sizeable profit from it, we should not book small profits due to lack of confidence. A strategy supported with a strong tp and sl, with necessary trading rules surely the best system to work in Forex. i believe candle sticks is a good trend indicator and it can be combined with other indicators to get more genuine signals.

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  5. #754
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    In my opinion price action is a very good style in which can be very welling to help us lead a very good trading strategy and the simplest way for analyzing the shapes of the different candlesticks , so by trading and focusing on the price action patterns so by finding them on different charts can improve our trading

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  6. #755
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    Quote Originally Posted by AmitChallenger View Post
    When we are in with a good trend, we should make a sizeable profit from it, we should not book small profits due to lack of confidence. A strategy supported with a strong tp and sl, with necessary trading rules surely the best system to work in Forex. i believe candle sticks is a good trend indicator and it can be combined with other indicators to get more genuine signals.
    When we do the analysis for the trend, we should also carefully understand how much profits we can achieve and what risk we need to take. Price action is best but those who cant understand it will not find it any useful in their trading. It is always better if there is a strategy and plan and they are followed during trading. Traders may have their own approach, main thing is learning here.

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  7. #756
    Trader layigold's Avatar
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    I have read price action basics part 1& 2 and this part 3 tries to tell us about value and price. I want to believe that "value place" is what majority of us are unknowingly familiar with because in price action, what matters to us is chart and candlestick patterns .Now that our eyes are opened to what is called value, I think we know better now though nothing may have changed on how we trade because it is all about what we have been doing before

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  8. #757
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    Quote Originally Posted by layigold View Post
    I have read price action basics part 1& 2 and this part 3 tries to tell us about value and price. I want to believe that "value place" is what majority of us are unknowingly familiar with because in price action, what matters to us is chart and candlestick patterns .Now that our eyes are opened to what is called value, I think we know better now though nothing may have changed on how we trade because it is all about what we have been doing before
    We can use the price action and the chart patterns to find the so called value, where we can expect some price movement which we use for earning profits. Price action is better because it is more accurate as it involves the analysis of the price movement itself. For good analysis we should trade in pairs we are more comfortable with.

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  9. #758
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    Quote Originally Posted by MIGHTYRAMESH View Post
    We can use the price action and the chart patterns to find the so called value, where we can expect some price movement which we use for earning profits. Price action is better because it is more accurate as it involves the analysis of the price movement itself. For good analysis we should trade in pairs we are more comfortable with.
    Value to trade, a simple way to find that is to establish where the market is trending, or where the breakouts can happen. Trend is the market flow and so we should make good analysis to ride the trend. Anyone who dont do analysis will not be able to avoid loosing his money. All traders can adopt price action because that is best means of analysis in itself.

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  10. #759
    Registered user erespe's Avatar
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    Quote Originally Posted by MIGHTYRAMESH View Post
    We can use the price action and the chart patterns to find the so called value, where we can expect some price movement which we use for earning profits. Price action is better because it is more accurate as it involves the analysis of the price movement itself. For good analysis we should trade in pairs we are more comfortable with.
    Chart patterns are part of a price action technique, very well applied to traders who trade with discipline. But to master this technique, good understanding is required, so that patterns can be correctly identified and used as an accurate trading signal. For that, learning about this technique must be true and not half-hearted.

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    “Not everything that can be counted counts, and not everything that counts can be counted.”
    ― Albert Einstein

  11. #760
    Trader ara's Avatar
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    Quote Originally Posted by erespe View Post
    Chart patterns are part of a price action technique, very well applied to traders who trade with discipline. But to master this technique, good understanding is required, so that patterns can be correctly identified and used as an accurate trading signal. For that, learning about this technique must be true and not half-hearted.
    Sometimes the market can't be identified, and sometimes we can identify easily. Having a good understanding of the chart pattern does not mean we can identify every market condition. That's why we have to keep our patience to not enter the market when the chart can't be identified by us. And that's the reason why many traders trade multipairs, when they can't identify a market in a pair, they can look for another pair that can be identified based on a chart pattern.

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