Technical analysis is the backbone of any reasonable success in forex trading. Players in the market who mean business closely observe market indicators of brokers (check topstepfx review) that are tied to prices and tailor them to their advantage in making market decisions or forecasting the direction of the market.

Analyzing market trends involves analyzing how market prices fluctuate over some time and using the observations recorded to make informed decisions. It’s akin to forecasting what is going to happen in the future by taking a close look at what has happened in the past. This process is called ‘Price Action Trading’.

It is a highly valuable technique based on price and volume (whether it is in scalping, positional trading, intraday trading, breakout trading), used in trading with popular tools like GKFX. Check gkfx review to get real spreads. Moreover it is more valuable than just depending on indicator charts. The prices and volumes are influenced by the trades of players in the market.

The good news about price action trading is that both beginners, mid-level, and professional players can take advantage of it with the help of different tools (just read jafx review). It gives every player across the board an equal chance to leverage it. Some forex brokers go a step further to allow you to automate your trading and give you access to advanced technical analysis systems through MetaTrader4, making price action trading even easier. You can check this MetaTrader brokers list for the list of brokers that provide this platform.

Are there indicators for price action?

Certainly, there are price action indicators, and the one that stands out among them is the price bars. The price bars indicate the market’s open, low, high, and closing prices. This indicator is made easily accessible by regulated forex brokers (check out reviews like the Pepperstone forex broker review to help you identify licensed brokers).

Price Action Trading Strategies

The Hammer

The Hammer price action pattern, commonly known as a bullish signal, indicates a high chance that the market is tending toward an upward direction after a downward trend. Basically, a hammer shows that sellers are driving the market down to a new low. But usually, they do not have the strength to maintain their position and so they end up bailing. At this point, the market rallies back up and buyers take control of the market. With the Hammer, the open and close price levels have to both be on the upper side of the candlestick. Sometimes, the closing price can be beneath the opening price but the signal is regarded to be stronger if the closing price is above the opening price.

The Shooting Star

The Shooting Star price action pattern, as opposed to the Hammer, represents a bearish signal showing a high chance of the market tending in a downward direction after an upward trend. It is the opposite of the Hammer strategy we looked at above. A Shooting Star pattern indicates that buyers are driving the market up to a new high. The buyers are, however, usually not strong enough to maintain their position and so they end up bailing. At this point, the market tends toward a downward direction and sellers take control of the market. With the Shooting Star, the open and close price levels should both be on the lower side of the candlestick. Sometimes, the closing price can be above the opening price but the signal is regarded to be stronger if the closing price is below the opening price.

Conclusion

Price action is fast becoming one of the most popular and powerful tools used by a growing number of traders around the world to study the market. Price action encourages traders to plan and make decisions that improve their chances of raking in profits.

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Disclaimer: Forex trading carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments, due to leverage retail accounts lose money. Before you engage in trading foreign exchange, please make yourself acquainted with its specifics and all the risks associated with it. The contents of this article are for information purposes only and do not constitute an advice or a Investment Advice or guarantees for the accuracy and reliability of the information. Readers are requested to check and refer relevant provisions of statute, latest pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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