What Is Forex Price Action?

Price action is everything that price is doing on any trading instrument, being represented on a chart for a trader to see.

In very basic terms price action illustrates in a way that a trader can see exactly on a chart, what a certain pair did for a particular time frame.

For example the individual candle sticks or bars will show how high the pair went, how low the pair went and also the open and closing prices. Most charting platforms can produce candle sticks and bars for time frames varying from 1 minute to 1 month.

Another way to think about it is, price action is everything humans are doing and how they are trading, shown in a chart form.

The basic explanation of this is not subjective. What I see on my chart is exactly what another trader will see on their chart, providing they are using the same charting equipment.

The next question is the important question. How can we use this price movement to profit?

Humans are very habitual. Traders tend to do the same things and react the same way over and over again when presented with similar circumstances.

Although if the same two traders have the same charts they will see the same Price movement that does not mean the same two traders will come to the same conclusion.

In this way price action can be interpreted by the individual depending on how they understand different price action formations.

If you have watched the charts previously you may have noticed that the same patterns, most of the time, repeat themselves. This is once again because humans are habitual and react the same way given very similar circumstances.

So if we can notice these patterns and human trading habits in the markets, we can start to find a trading strategy and implement it, to make money off the other traders, while they carry out their normal trading patterns.

These patterns will continue repeating themselves as long as human's trade. Like I said, humans are very habitual and most of the time they repeat themselves, over again given similar circumstances.

What is needed to trade price action?

Clean charts

Price is best seen and traded from clean charts. To trade price action we don't need fancy indicators or anything at all except for a clean chart.

Many Traders fall into the trap of thinking the more indicators they have on the charts the better chance they have of predicting where price will go. This is just plain wrong. Indicators just confuse what doesn't need to be a confusing process.

Solid method

Trading price and price only in the Forex market is the best way to consistently predict movement. For a Trader to do this however they need a strong method and skills to trade with. Learning a solid price action method to trade with will give traders the skills and understanding they need to trade effectively.

Continual education and practise

Trading the Forex markets with price action is a skill that takes continual practise. The Forex markets are continually doing new and different things and all Traders from the beginner to the advanced can continue to learn by trading and watching price action through their charts.

An edge on the market

A trading edge is something that gives a trader a statistical advantage of being profitable over a sample size of trades. The edge for a price action Trader is their price signals and trade management.

Traders need to learn how to trade low risk with high reward setups, using solid price action formations that form in the markets time and time again. Without an edge a Trader may as well just flip a coin because even a coin toss should average out to 50/50.

Trading can be very rewarding and profitable endeavour if the trader knows how to trade using solid price action techniques. Trading with raw price allows the trader more flexibility and a lot less stress than the Trader who trades with so many indicators they get confused.

In Forex trading less is more. Less confusion and less over complicating things leads to more success and ultimately more profit.

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