What Is Price Action? Why Is It So Popular In Trading? (Part 1)

What Is Price Action? Why Is It So Popular In Trading? (Part 1)

I will start a series of trading with Price Action on Crypto, Gold, Crypto markets…

In this series, I will share my own experience on how to analyze, view and enter orders based on Price Action. It will consist of the following things.

– Detailed planning on capital, psychology, knowledge cultivating…

– Trading according to the plan

– Some small tips to reduce psychological factors in trading.

– Summary and statistics of my trading process.

Ok! Now we are going to the first post in this series. What is Price Action? Why is it so popular? This is some background knowledge you need to study first.

What is Price Action?

Price Action (also known as PA) is a trading strategy that follows price movements. Simply put all your entry decisions will be based on the price chart (ie candlesticks).

The PA school is loved by many traders because of its simplicity. No need to be “complicated” with technical indicators or trading news. Just focus on the chart and the price movements. They will tell you the story of the market. From there, you will know what to do to make a profit.

What is Price Action?
What is Price Action?

My Price Action trading ideas

– Trend is the most important. The first question will be “What trend is the market in?”. Bullish (Uptrend), bearish (Downtrend), or sideways.

– Identify important supply and demand levels. I will call these the Key levels.

– Wait for the price to react at the Key level and create trading signals.

– Find the entry point to enter an order, the level of Stop Loss and Take Profit.

My Price Action trading ideas
My Price Action trading ideas

My trading style when it comes to Price Action is the above 4 steps. And in this series, I will only write and practice those 4 steps. For me, the decisive factors to make money in any market are psychology, capital management, discipline, and patience. As for knowledge, you just need to do the above 4 steps over and over again.

Why Price Action is popular?

“The market is always right.” You may have heard this saying before, let me repeat it once again “The market is always right”. So you and I, let’s focus on the price to listen to the story the market wants to tell.

Safe trend trading strategy

Price Action is a trend-following strategy to find safe entry points. To me, this is the biggest advantage of PA compared to other technical indicators.

People often say that fighting against the market trend is like stopping a train at its maximum speed. The result is your death without a doubt. Not going against the trend is the best way for you to survive in the market.

Trend trading is the best way to survive in the market
Trend trading is the best way to survive in the market

The pinnacle of simplicity

The simpler the better.”

Trading is not about having many screens in front of you or putting in a variety of charts and technical indicators. Don’t try to chase after things that are complicated and confusing. They only make you tired and easily get caught up in the market’s trading vortex.

Let’s start with simplicity. Let your mind be light and calm.

Price Action is the pinnacle of simplicity
Price Action is the pinnacle of simplicity

Flexibility

Trading according to Price Action means trading based on price movement. Therefore, regardless of the market, you can use it for analysis and prediction. Coin, Oil, Gold, Crypto… or stock, you can all have PA as a trading method.

Not only that, you can use PA to Scalping with M15, or Swing with D1 time frame… No matter what your trading style is, Price Action can be used flexibly.

Some knowledge you have to prepare

I have prepared some extremely detailed articles for you to read. These are the basic knowledge for you to grasp about Price Action.

– What is the market trend? How to identify a trend? Read these four articles about UptrendDowntrend, Sideways and Retest carefully.

Knowledge of Uptrend, Downtrend, and Sideways
Knowledge of Uptrend, Downtrend, and Sideways

– About how to determine the Supply and Demand zones (Key levels)

– About candlesticks, I just need you to know 2 candlestick patterns: Marubozu and Pin Bar.

– Use Risk/Reward ratio with a value of 1R = 2% of the total capital.

Only risk 2% of the total capital
Only risk 2% of the total capital

Easy to read, easy to understand, easy to grasp. Just learn some background knowledge. In the following article, I will make basic plans to trade with Price Action including the capital, time, psychology…

Price Action trading examples

Although there is not an in-depth guide to Price Action, you should learn to observe the market to gradually become familiar with this strategy.

– SELL EUR/USD: 1.1815 (SL 30 pips, TP 90 pips) => R:R = 1:3 (1 part of risk for 3 parts of profit).

Reason for entry:

+ On the daily chart, EUR/USD is in a downtrend. The price has returned to the Supply level.

Reasons to Sell EUR/USD
Reasons to Sell EUR/USD

+ In the H4 chart, the main signal is the extremely strong bearish reversal red candlestick that I marked. So we have all 3 elements to enter a SELL order by Price Action: Downtrend, price retraces to the Supply level and creates a reversal candlestick signal.

SELL order EUR/USD
SELL order EUR/USD

– This GBP/JPY currency pair is entering the Supply level in the Downtrend. What I am waiting for is a bearish reversal signal (1 strong bearish candle, for example) to open a position.

Trading GBP/JPY with Price Action
Trading GBP/JPY with Price Action

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