Perhaps you are new in the forex trade and you have heard other traders talking about price action or PA and wondered what they were referring to; they are simply talking about forex charts in general but specifically the movement of actual prices. You will realize that, if you have a candlestick on the one hour timeframe you will end up with PA data worth an hour and if your candlestick has a five hour timeframe you will have 5 hours of PA data. This means that you need more PA data for you to have more accurate predictions; getting a daily candle therefore gives you more data to work with than someone who goes for smaller timeframes.
Forex trading using price action gives you the ability to predict price movements on the charts by only observing the available PA data. You only need to be able to spot a particular PA setup or configuration which will allow you to make an accurate prediction on the direction the price is taking. Most traders use indicators such as RSI or Stochastic on their charts even though they don’t really understand how they work. Most of these indicators use very complicated mathematical formulas to draw lines on the chart you are watching. It beats logic for anyone to use a system that is too complicated to understand.
May be you need to know that these indicators actually use price action to draw those lines for you and if that is so, you can avoid all the confusion and go straight to the source of the information. By going straight to price action you will have cut out those indicators and in the process start understanding trade patterns and why you should take particular decisions. Thai enables you to place any trade that you do with the confidence of knowing that you understand what is happening and exactly how the system works. The other advantage of using PA is that the indicators are sometimes slow which means you can easily miss out on some moves. Using price action makes you, the trader, understand the market and spot the patterns for yourself; you also position yourself in a place where you see all the positive action.
There are different PA setups traders can learn to work on; these can be in the form of a candlestick or a combination or two or three and sometimes a cluster of them. Price action trading setups are normally simple even though there are those that are a little complicated. You are always better off playing it simple because when it comes to forex trade, keeping things simple doesn’t necessarily mean you will get less profit. Actually, the secret of succeeding with PA is keeping things as simple as possible. Experienced traders will tell you that trading with single candlestick has always been the most profitable approach. As long as you learn how to watch and correctly interpret candlestick signals, you will make better profits without exposing yourself to very high risks. This is actually the essence of forex trade; you can become an accomplished trader by using simple price action methods correctly.