Price action is one of the most often used trading strategies. A trader who understands how to use price action correctly may considerably enhance his performance and method of looking at charts.
However, many errors and half-truths continue to circulate, confusing traders and setting them up for failure.
In this post, we’ll go through the top eight price action secrets and offer some price action trading advice.
1. Multi-candle patterns are more dependable than single-candle patterns
The more candles in a pattern, the more trustworthy it is, with three candle patterns being preferable over single candle patterns. In most cases, 30 candle patterns are preferable to 3 candle patterns.
Over this, patterns like head and shoulders, double and triple tops are among my favorites. They routinely provide higher-probability trades, which is what we’re all looking for.
This isn’t to say that a nice pin bar setup won’t work; it just means that these multi-candle setups have a better chance of culminating in a profitable trade.
2. Know where you want to put your stop loss
Just knowing where to place an order is the first step. What is the location of your stop loss? Fixed pips stop loss levels are seldom a suitable strategy since market volatility can fluctuate, and each transaction should be evaluated in light of recent market history.
3. Always keep an eye out for intersections
This is without a doubt one of the most significant secrets you should be aware of. The importance of confluence cannot be overstated.
So you’ve discovered a fantastic price action setup. Great! Check for confluence, which means that it corresponds with other reliable signals that support your trade hypothesis.
4. The best price movement is to the left
When looking at a price action setup on a chart, the finest setups are almost always clean to the left. That is to say, the candles preceding the price action setup should not have been around the same price levels as your price action setup.
5. Identify key support & resistance zones
Support and resistance (abbreviated as S&R) are terminology used to describe places on a chart when price reverses at its lowest (support) and highest (resistance). Traders watch for greater buyer and seller activity around these levels, therefore these zones are frequently “tested” numerous times. It’s worth noting that support and resistance are frequently defined as zones rather than narrow lines.
6. It’s all about context
You should interpret a price action setup differently depending on where it occurs. Depending on whether they appear at the bottom of a downtrend or the peak of an uptrend, the same pin bar can be bullish or bearish.
Not all patterns are worth following if they aren’t preceded by the correct price action and occur at levels that are significant in some manner.
7. Tell a story about what occurred
Every chart has a story to tell— it may be a narrative about a straightforward path or a nasty back-and-forth battle between buyers and sellers.
We can talk about clean price activity vs. messy price movement in a similar way. It is the trader’s responsibility to uncover the tale and have a better understanding of what the market may do.
8. Stop hunting and squeeze the amateurs
Traditional price action patterns are fairly evident, and many traders feel their broker hunts their stops since they constantly seem to be stopped out – despite the fact that the setup was so plain.
When a price action pattern occurs, it is quite easy for a professional trader to anticipate where amateur traders will start trades and put stops. The “stop hunting” you’ll see is done by profitable traders who simply squeeze novices to produce additional liquidity, not by your broker.
This is one of those price action secrets that may make a big impact, and many of our students have used it to dramatically change their trading.
Final Thoughts
The price action technique is a far more powerful and fundamentally sound method of analysis. The distinction between traders and market money is determined by strategy.
As a result, a smart move may be a tremendous benefit in terms of extracting a large sum of money. Using automated stock trading systems can also be beneficial.
The advantages of using an auto trading system are vast. You can trade while sleeping and conquer trading hurdles. What’s more, the best thing is that it’s all free. Even if you don’t have time to engage in the market, an automated system allows you to do so.
If you want this innovative solution, make sure to send us a message and request one-on-one trading coaching.