Price action trading is a form of price forecasting that has been around for centuries. Merchants first used it to predict price fluctuations in goods. However, traders who use this strategy are not limited to the use of price charts and graphs. Instead, they look at market sentiment as well as any other factors that could affect prices. Below are three steps of price action trading for beginners to get started with:
1) Identify your entry point: Price action traders look for price fluctuations that may indicate the start of a trend. They then use their price forecasts to decide where and when to enter into trades.
2) Determine how many risks you want to take: These traders use price levels to determine their stop loss amounts.
The price level is when a trader decides to exit from a trade to take profits or limit losses. In price action trading, traders will typically place stops below key support levels or above resistance levels as they look for optimal entry.
3) Choose an exit strategy: Price action traders are price-action trend followers, meaning they take profits when the price moves in support of their position.
Price Action Trading has been around for years and continues to gain popularity as traders learn more about it. This type of strategy works great in all market conditions, especially during high volatility periods when price action traders can take full advantage of price movements.