What is price action strategy?

Posted by tedmark on March 27th, 2015

Price action is a method of analyzing how a security behaves, but not in terms of volumes sold and bought, but in terms of price. The price of a security is carefully analyzed by traders who hope to gain important amounts of money through financial speculation. The best strategy that a trader can adopt is to analyze the most important price action indicator, which is exactly the price of the security, for a period of several months or for an entire year.

Instead of checking the foreign exchange market for the most traded currencies, some traders prefer to look at another feature of a currency, namely at its price. This gives them the chance of anticipating its future price in relation to another currency, allowing them to buy or sell that specific currency, with the purpose of obtaining profit. Analyzing the price history of a security can give an experienced trader enough information on how the market of that security will evolve.

This method of analyzing a security’s price history does not rely on tips regarding the future behavior of that security, but is more a type of technical analysis that gives details about the potential price that the security could have in the future. Traders can adopt a number of strategies when trying to obtain a profit out of financial speculations, but those relying on tips received from friends, family or from the Internet are usually not that successful.

To explain it better, let us imagine that you want to trade American dollars. You have euros and want to buy dollars at a low price and then sell them at a higher price, with the purpose of obtaining a profit. Predictions may say that the dollar is about to become more expensive, so this is the best time to buy dollars, hoping that their price would go up in the future, giving you the possibility of selling dollars at a higher price and obtaining a profit. But what if this does not happen? What if predictions do not have a correspondence with reality?

Would it not be better to analyze the former prices that the dollar used to have in the past, in relation to the European currency? Instead of relying on predictions and tips, it is recommended that you perform a mathematical analysis of how the price of the dollar has changed throughout the last months. This should give you an idea of how its price would evolve in the near future. This is what specialists call a "price action", otherwise known as an action that takes into consideration the price of a security throughout a certain period of time.

The most important price action indicator is the actual price of the security that has to be thoroughly analyzed. While it is easy to analyze a chart, at the beginning, traders could feel a bit overwhelmed by all the graphics present there. To avoid confusion and making wrong decisions, it is recommended that traders contact a professional specialized in trading currencies and other securities to provide them with useful advice and recommendations.

Looking for a friend that can advise you on how to trade currencies successfully? We are the best friend that you could have. We specialize in Forex trading and use the price action method to help you gain money. The most important price action indicator that we take into account, the currency’s price, will have an easy-to-understand graphic configuration that would help you trade better and with more success than in the past.