by Sapphire Hart
What are price action strategies? What do they translate too? Why are they so essential in the trading world? Stop, stop! It's time to put a full stop to all the pondering. We got you! From helping you understand what price action trading strategies are to giving you an insight about trading decisions based on the price fluctuations - we'll help you through it all.
To say it off in a nutshell, price action talks about the characteristics of the security price movements. It's the trading technique that allows the trader to read the market and take subjective trading decisions on the fluctuating market trends. Pretty subjective in nature, it's not all about the technical indicators rather the core point is that it revolves on recent and actual price movements.Learn more about trading strategies xtb trading reviews
It basically is based upon a two - step process:
- Taking into account the scenario: This part of the process talks about the standing of the stock price - is it in the bull/ bear phase? Is it in the channel range? Or the breakout phase? The trader takes a deep insight into this.
- Which Trading Strategy implies the Best: This process talks about the behavior of the particular stock, for example; the stock is in the Bull Run phase, will it overshoot or retreat? Two same traders have two different opinions; given the same scenario. Here's where the subjectivity element comes in!
Here are the two go - to price action strategies that are the talk of the town today - have a glimpse and smoothen out your trading game!
Starting off with the basics and getting right to the point - let's enlighten you with the best! The hammer price action is one of the most common ones and works around the bullish signal that signifies a higher probability of the market moving higher than lower. This is usually used in up - trending markets. This gives an indication that the sellers are moving the market to the new low. Not being able to strengthen the position, they end up bailing and the market goes up again. This makes the buyers the power holders again. The ideal situation for the hammer strategy is that both open and close prices are at the upper side of the candlestick. Sometimes, the prices fluctuate and the closing price can go below the opening price but the other way round depicts to be stronger.
This strategy gives out an indication that the price could start falling soon enough. The bearish reversal pattern revolves around a single candle. Formed when the price is pushed upwards and then rejected lower right away leaving behind a long wick to the upper side. A great way to trade a shooting star is closely analyzing and spotting a candle with a relatively small body and a big upper wick. Break for it to break the low point of the shooting star body. Next, ensure an elevated volume which signifies a heavy supply.
George is the Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, I served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst.
George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.
About Sapphire Hart
Sapphire is a seasoned blogger known for her expertise in the fields of credit cards, finance, and banking. With years of experience and a deep understanding of these subjects, she has established herself as a trusted source of information and advice for her readers. Sapphire's blog offers valuable insights into various aspects of credit cards, including tips on choosing the right card, maximizing rewards, managing debt, and improving credit scores.
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