Price action basics. Part 3 - Page 77
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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. #761
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    Any one will be able to establish career in forex with any preferred level of funds. Such as: if you are a retired person, you can try some standard trading account or micro trading account. Here, no matter what is the preferred level of investment every trader who wants to start trading in forex should try to gather basic knowledge of trading which will be the ultimate support system for him.

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  3. #762
    Trader J_C_Anderson's Avatar
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    Of course, trading conditions offered by the brokers are flexible enough so that the traders with small amounts of money could open an account and start trading. At the same time, it is important to mention that almost all such traders would lose their entire capital due to the mistakes in money management - they will overload thier accounts with huge positions to get substantial profit. When you have small account, you have to risk more to be able to make relatively large profit.

    Price action approach is one of the most efficient in trading. Fundamental analysis related to Forex is quite difficult for newbie traders since they are not professionals in the sphere of finance, while PA is simple, so anyone would be able to get familiar with it and use during trading process. Another important advantage of PA-based strategies is that they could be easily tested with the help of special tools like Forex Tester (special backtesting software for testing strategies on historial data), and it is impossible to test strategies based on fundamental analysis.

    Price action trading is very popular, so one can easily find a lot of information about in within the web, including books, interesting articles and videos. It is also possible to find communities of traders using price action and discuss your own ideas with them to find the best solution.

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  4. #763
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    We all know that its not 100% that each time we trade using price action we can get good results. But if we can find the highest accuracy pair using price action I am sure we can have good profit trade also. Just imagine if you going to trade the top three pairs that has high accuracy rate then we can make good income each year.I believe to recognize the actual pattern from the marketplace using the cost motion really is easy

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