Forex Price Action Trading Strategies

Forex Price Action Trading Strategies

If you are tired of all the conflicting indicators cluttering up your chart, then perhaps it’s time for you to use Forex price action trading strategies.

If you’re not familiar with Forex price action trading, it is basically a focus on analyzing the future direction of the price based mainly on the past price patterns alone. This approach has a lot of validity when you consider that all indicators are based on some kind of derivation of time and price anyway, and this “processing” of the price often masks specific patterns within the price action itself. Here are the best Forex price action trading strategies and tips to help you get a handle on this key trading style.

The Best Markets And Timeframes For Forex Price Action Trading Strategies

Forex price action trading strategies are best executed in a liquid market, which makes all the majors a good option for you to start off with. The reason why you want to trade price action strategies in a liquid market as opposed to an illiquid one is that the price patterns are more indicative of what is really going on in the market. When you don’t have enough participants and volume within a market, then you will tend to have gaps and jumps in the price rather than a smooth progression from one price level to the next.

When you are trading price action, you will get better results if you are trading a longer term time frame as compared to a shorter one. This is due to the fact that the higher the timeframe you are trading, the more data you have contained within one price bar. That means that there is a lot less randomness and a lot more weight in the data itself. For example, if you were to trade the 30 minute or hourly timeframe, you would have much better information to work with than say a 5 minute timeframe. For Forex price action trading strategies, I would recommend a minimum timeframe of 30 minutes for the best results.

Video of Price Action Trading Strategy:

My Best Forex Price Action Trading Strategies & Tips

There are many different styles of price action trading, but the main two that I will focus on briefly are the Japanese candlesticks pattern analysis and swing trading. Japanese candlesticks are often used by Forex traders because it gives a very clear and easy to read chart compared to the typical Western OHLC style, but there’s a hidden benefit to using the candlestick charts. There are many established candlestick patterns that are considered “predictive” to the markets’ future direction. These include single bar candlestick patterns like the spinning top, doji, hanging man and shooting star, double bar candlestick patterns like the bullish and bearish engulfing and tweezer tops and bottoms, and triple candlestick patterns like the morning and evening stars, three white soldiers and three black crows. These are all elegant ways of describing recurring patterns that are formed on a candlestick chart, and you would do well to study these patterns further and see what they tell you about where the market is going.

While candlestick pattern analysis focuses more on one to three bar patterns, swing trading is more about analyzing the overall trend of the market based on swings. A swing is essentially an extreme point within the market, and can either be a swing high or a swing low. A swing high is a bar that forms a higher high than the immediate prices preceding and following it, and a swing low is a bar that forms a lower low than the immediate prices preceding and following it. The swing high and swing low aren’t so significant in themselves, but when you observe the pattern of successive swing highs and swing lows, it can reveal whether the trend is going up, down or sideways. Often, the market shows a great deal of respect for these swing high or low points as well, and they are ideal for stop placements and profit targets depending on your style of trading.

The Final Word On Forex Price Action Trading Strategies

All in all, Forex price action trading strategies are a powerful tool to add into any trading arsenal to give you an additional insight into the future direction of the market. Candlestick analysis and swing analysis are two effective strategies that you can use to stack the odds in your favor and improve your overall trading profits.