Price Action - Price Action Explained

What is price action?

Price action is the behavior of price of a specific currency, commodity, stock or other trading instrument over a specified period of time. Price action analysis deals with the predictive capacity of specific price patterns that occur on a semi-regular basis over a given period of time. Certain price patterns re-occur in the markets and can be used to develop a rule-based system.
Price action analysis allows you to see exactly what is happening in any given market. Price action is the visual trail of the supply and demand situation of the given trading instrument over a specified period of time. Price reflects the expectations and beliefs of all market players; the bigger more informed players obviously leave a more noticeable trail, so by analyzing the behavior of price over a specified period of time we can make an educated guess as to what those “in the know” are doing in the markets.

As retail forex traders, our goal is to jump aboard the price trail left by bigger players who have the power to move the market. By building our price action trading system around a few time tested and repetitive setups we give our selves the best shot at riding the momentum of the market to consistent profits. There are certain things that happen over and over in the markets as a function of their very nature.

Most people who have traded actively for any length of time will attest to the fact that trading is about 80 or 90 percent psychological and 10 to 20 percent method. Most traders start off by thinking it is the other way around and thus end up losing money and finding themselves losing what seems like a constant fight against the market. What price action analysis provides for you is a simple, straight forward, and most of all, effective method that allows you to focus your energy and time on the more important psychological side of trading. If we as technical traders are primarily basing all of our trading ideas off of charts then why would we confuse and frustrate ourselves with anything but what the chart is made of which is of course price action?

In order to master the markets we need to root our methods of trading in consistency. In fact, all of our trading activities need to be consistent if we are to truly be consistently profitable traders. Price action analysis gives you the know how to recognize specific price patterns that happen over and over in the market. This gives you the key to consistency that so many traders desire yet so few ever attain. Excellence in any profession is most often accompanied by great training and mentoring. To learn consistently profitable price action trading strategies you should learn from someone who trades with the exact same methods they teach. So get yourself a sold education in specific price action patterns and I promise that you will be well on the path to trading consistently.