There is an abundance of trading techniques and strategies that have been developed ever since the early days of the financial markets. Some have fallen out as the markets developed and technologies advanced. However, the very best ones adapted and endured – and are still being used even to this day.
Price action trading is one of those strategies that has endured throughout the times. To this day, price action trading has not only remained, but it has surged in popularity. Millions of knowledgeable traders still use the tactics afforded by price action trading to trade in the markets.
Today’s guide to Price Action Trading will discuss the basics of this fundamental trading tool, as well as how it works with pin bars. Without further ado, here we go.
Overview of Price Action
Because of its principles and strategies, Price Action Trading is most often used for fast-moving, volatile markets – such as financial derivatives. However, price action wasn’t created solely for that purpose and can be applied to all of the markets.
This kind of trading ignores fundamental analysis entirely. This means that this technique does not evaluate the asset’s actual value, and instead relies on the movement of its prices in the financial market. Traders of this discipline have the belief that the most important aspect in making trading decisions is based wholly on the past, future, and current price of the financial asset being traded.
Because of this, a lot of devout price action traders do not use indicators at all – however, there are a lot of different ways that price action trading can be implemented, and some traders still prefer to use these indicator tools.
Why use price action trading?
Traders of this principle believe that everything has already happened in the market and that history will always repeat itself. Thus, an asset’s prices will always deviate around a certain price point – and eventually, repeat the patterns that it has already been through. Using this knowledge, traders of price action techniques can predict the overall movement of an asset’s price and can make accurate guesses about how they’ll move during certain scenarios.
Price action followers always seek to answer the question “where will the price most likely go when it arrives at a certain point?”. The more certain they are of the answer, the more accurate their predictions become. Because of this, all they have to do is identify patterns of prices that repeat themselves on their charts, and they can make their conclusions from there.
There are also no set rules for price action trading. Although many guides exist, one of the primary ‘rules’ for price action trading is that the trader must develop their own strategy, as there are a variety of ways to interpret a given scenario and each trader will differ in his or her assessment.
Other reasons why traders may find this technique appealing is the fact that these flexible, subjective strategies give the trader a sense of control instead of just blindly obeying some set of rules. More than that, this strategy can be easily implemented in any software, across a lot of different financial markets, and for the most part, does not require a lot of intensive mathematical analysis.
Price Action Trading on Binomo
Although it is possible to trade without the use of indicators, price action techniques still work well when applied with support and resistance levels. This is because prices behave predictably when in these situations, and price action traders can use that predictability to further enhance their analysis. Take the chart below as examples.
The price action follower can use the appearance of the pin bar candle as a signal for an upcoming trend reversal.
Notice how the red pen developed in the first image. This signals that there’s little chance of prices rising above pin’s shadow – it sort of like became a resistance level on its own. The following downtrend confirmed this prediction.
For the second image, a bullish pin bar appeared towards the end of a downward trend, in turn, signaling that prices can’t get any lower than the pin’s shadow. For the price action trader, this then signals a trend reversal.
What you need to trade using Price Action effectively
Price action trading – just like everything else, cannot be mastered overnight. You’ll need to be able to read and understand price charts, which means knowing about the different kinds of candles and their meaning, among other things.
One will also need to be able to see the price patterns present in the asset being traded, which requires a deep understanding of support and resistance lines.
Lastly, you need to be able to have such a thorough understanding of the know-how and the market you are trading, that you’ll immediately know what the prices are going to do once it reaches a certain point.
All of this doesn’t happen immediately. “Rome wasn’t built in a day”, as they say, and your portfolio, too will not be rich overnight using price action strategies. You need constant studies and practice to reach a truly competent level – and you need to have a professional, encouraging, and safe place to do it.
That’s where your Binomo account comes in handy.
Verify your Binomo account and make your first deposit
A Binomo account is handy because not only does it offer in-platform guides and tutorials, it also has a demo account that you can use to learn to trade – and it’s completely free. You can practice all the techniques you’ve learned in the demo account, and begin to develop your trading strategy.
If you verify your account, you’ll get perks like adding additional layers of security and having your transactions (deposits and withdrawals) be processed faster. Binomo account verification takes about 5 working days.
After your verification, it’s a short step towards actual trading. If you wish to begin to trade in earnest, make your first deposit – it’s easy as 1, 2, 3.
The platform can accommodate different payment methods such as through e-wallets (like Jeton Wallet), debit cards, or credit cards. Regardless of the payment method, your deposit will appear on your account in a matter of minutes.
Once you are verified and you have made your first deposit, you can immediately start your trading career – perhaps using price action trading techniques.
Once you have deposited money in your account and had it verified, it’s time to start trading. Try out the Price Action trading strategy I’ve taught you today!
Have you already created a free demo account on Binomo? I’d love to know about your experiences in the comments below!
Good luck on your trading journey with Binomo!