I’m a new Forex trader and I’ve recently come across the Forex Price Action Strategy. Really, with so many experienced and popular traders like NickB using and promoting the price action system, I think this is worth a try.
From what I understood, the concept of price action is to trade naked, without the use of any indicators. Since indicators only shows historic price, you don’t get what’s happening live in the markets. To understand if the bulls are in controls or the bears, one must use the raw price to take trades.
Something that intrigues me is that, is it possible to use trendlines to reinforce your price action trades? Trendlines tell you how price has been acting and where there might be potential support or resistance.
So, if I plot trendlines on the chart and combine the strategy with price action, can I get better trades? Has anyone here done this before?
[B]Price action traders, I call upon your wisdom and ask for your advice![/B]
So, price action relies heavily on candlesticks, right?
A candlestick isn’t cemented on a price chart until the candle closes.
So, what’s the difference between reading price off a candle which has closed, and analyzing how price has moved via an indicator?
Most indicators are indeed lagging by pure definition. It’s how some are used which can aide in predicting movements in price- ie making them “leading”.
Price action comes under the umbrella of technical analysis. Drawing trendlines, scouting key levels in advance etc are all other things which come under technical analysis.
FOREXunlimited, I wouldn’t agree price action relies heavily on candlesticks because candlesticks is one form of reading price movement (even if most popular today). You can rely on a candle after it’s closed but most people who use candles in my opinion use them based on what the candle is doing while open (which is the crux of price action).
I dont consider trendline and also support n resistance as indicators because u draw them manually based on your analysis. They work more like guidelines. Those levels actually mean something.
Yeah you can use basicly anything. Trend line, support lines, fib’s, hermonics, candlesticks patterns… If you don’t know candlestick patterns and don’t know how to read HLOC bars then I would suggest to usea line chart, mark in the support resitance, place fib’s everywhere and where ever you have a fib and support/resistance line in congruence, then that’s a valid area. Subtract 15% from the resistance and add 15% for the support, now you made your own little RSI based on price. Elliot waves should also help since he’s using the abc in his drawings. It’s not the best way and you should have as many tools as you can learn, but it does work. The downfall of doing things like this is when the support or resistance does not hold and there is a break. The plus is that with a line graph you shouldn’t be caught with any fake breakouts, the drawback is that it gives you limited information except for close price.
I don´t think traders can predict what is going to happen with the markets in the future. But we can play our cards with the probability with us. And there is where indicators can help us a little.
I don´t use indicators nowadays. But when I started trading some years ago, they help me to understand how markets can show signals of weakness, when a movement may be taking its last breathe or its first momentum.
They are a good way of becoming a better trader. but sooner or later, when we really learn to “read between graphics”, we get used to let them more and more naked.
And, of course, I think that TrendLines are one of the most powerful tools a trader can have.
Yes you can use basically anything such as candlestick pattern, trend lines, support lines e.t.c but trend lines are probably the most common form of technical analysis today. If drawn correctly, can be as accurate as any method.
IMHO tools in your chart is just there to help clarify things that you already observe. A trader can see higher highs and lower lows but to make things more visible he put the trend line. Once you train your eyes to observe the chart you will see ridiculous amount of patterns coming out of your chart. That’s what I noticed the pros kept saying for many years and obviously they are right.
Yeah, it is a very useful tool. Helps determine direction more accurately and can be used to spot trade changes quicker than an indicator.
There are several ways that people draw them though. Some draw them through part of the candles, but others including me draw them by connecting the lows/highs of the candles- the wicks. This is a more accurate way of drawing them.
My blog (drfxtrading.blogspot.com) as well as my thread in Swing Trading has more examples of how to trade draw them. I also provide a Manual for people to use based on Price Action. Avoiding complicated indicators is the best thing to do-definitely helps in cutting down on the high failure rate of traders.
Just watched your video on s/r areas. How do you determine which are the support/resistance areas? Do you use Pivot point, Fibinacchi, highs and lows of a swing or by other means
If i can share some things I have learned over the years.
First off candlesticks are not required to read price action. I have seen lots of people use a line charts which are a 1 period sma (is that an indicator?) I have heard some say candlesticks just add noise (in some cases it can be true).
Second yeah I agree to an point that you should trade naked. You should have a understanding of what price itself is trying to tell you before you could those thoughts with indicators. Think about it, if price is moving down that is something you can physically see. You dont need anything to tell you this. Sure might not go is a straight line but its going down. How far is it going down, well nothing out there even your eyes can see into that black hole price has not filled in yet.
As far as indicators go will they help you? No one really knows its something you will have to find out for yourself. Just remember they are a tool and tools fail. Always keep an eye on price and use tools for what they are designed to do and you will figure it out. Also the last I checked a trendline is not an indicator but merely a line you drew on a chart that could suggest where price will go or react. In time you will get better at drawing them for you and what price is telling you.
What ever you choose to do just try not to get blinded by indicators. People can be indicators. Take all the fxmen and ask if price is going up or down take the general consensuses and place your trade. I bet sometimes it works and sometimes it dont. Only you can tip the odds in your favor and how you go about doing so will take patience and a lot of it.
So if you want to use a trend line then go for it. You will get good at drawing them and eventually you will see them with out drawing them. Or you will deiced its a waste of time for you.
I’ve been dabbling with PA lately, and I make sure to keep using my trendlines. They more or less help me figure out when to exit a trade. Last thing I’d want to do is to try and hold a position, that exists well beyond support or resistance levels. I personally use just the 4H chart for finding trends, and it’s worked very well for me so far. Trying to figure out stuff on the 15m, 30m, and 1h is too small a size for my liking. It more or less gives me a look at how things could shape out during the week, and a rough timeframe of when to start watching for movement.
Candlestick is only a tool to confine price within a set of time. It was originally meant as an indicator by itself. Some people prefer renko chart to see pure direction of candlestick.
It’s good to draw trend lines but eventually people will not do it anymore because they will be able to notice the levels and lines on their chart. Some though still draw it as a reminder because they switch from different time frames.
