Price action is one of the hundreds different trading techniques. It tries to identify some patterns, which outcomes can be anticipated. Price action is a widely used an effective tool for binary options trading, and you can learn it fast. In this article, you can get Price action basics.
What Is Price Action?
Price action is the name given to the technical analysis of an asset’s price in order to anticipate its future price accurately moving direction. There are several scholars and broker experts, who agree about the asset’s price enclose a massive amount of information. Among those experts is J.W. Henry, who said, “the asset’s price represents the whole company financial performance. The overall assets’ prices are a reflection of the entire national economic situation for the time when the price is watched. He went further and made a bold statement “shares prices are the principal sources of information needed to make the right trading or investment decision.” This technique has been proven right for the last 35 years.
In a nutshell: Price action is the technical analysis of an assets price to anticipate with great certitude its next price moving direction and trade accordingly.
Learn more about Resistance & Support Lines
Understanding Price Action
· Technical analysis is the evaluation of an asset’s price record history, the past and current market tendencies to find a signal, which anticipates the price moving direction. In addition, technical analysis often uses some indicators, oscillators, price charts, bands, etc.
· Price chart is the graphical representation of the asset’s recorded price history.
· Candlestick chart is a price chart widely used, in which the open and close price as well as the highest and lowest value for the day is graphically represented.
· Signal is a well-recognized pattern which has been studied hundreds of time, and its outcome is known entirely. Therefore, a signal accurately identifies a pattern that will be followed by a price moving direction. This pattern allows anticipating the next price moving direction.
· Oscillators, indicators are analytical instruments, which can identify a momentum by assigning a numerical value to the assets studied condition.
· Call to action is the suggestion to trade in a particular way for a particular asset. It includes the time and the best maturity. Binary options call to action can be to buy a call or a put.
Using Price action
1. Select the asset, which you want to study
2. Search for the asset’s past recorded price information. You can consider almost any period for this purpose. However, to be more efficient a 22 to 100 periods is enough at the beginning, Notice that period does not mean days. The period is given by your binary options trading technique, and it is based on the Binary Options maturity. E.g., One day, one hour, 15 minutes, 5 minutes, etc.
3. Identify the asset’s opening and closing price for each period. It is paramount that you pay attention to how close are getting the opening and closing for the previous as well as for the next period.
4. Draw the candlestick price chart or the price chart that work better for you. The best way is by using a trading software if you don’t have any, you can use the technical tools, which are given complimentary free of charged in some trading platform
5. Identify and draw the support and resistance lines.
6. Compare, the price chart with the well, know chart pattern. It is the most tricky part since you need to devote some time and go over many charts to be sure you are reading the signs properly and you understand in full the price chart meaning. You have to be able to recognize the price pattern, its call to action and most important you must anticipate the asset’s price next moving direction.
7. Use a confirmation method, When you are a rookie price action trader, the chances are that you can misread the charts, the patterns and the suggested price moving direction, using a confirmatory method, such as oscillators or indicators increases your capacity to anticipate the next price moving direction increasing your profits.
8. Trade accordingly. It means you need to be ready to buy a call or a put for your binary options as soon as you get the information and you corroborate it.
9. Keep learning more pattern, and its meaning Trading is a never-ending story, and your knowledge is the difference between making money and becomes monetary wealthy or loss the invested money and feel afraid about investing in Binary options, or any Stocks. No matter how secure you feel, or how solid your skills are, you need to keep learning and take advantages of any new tool available.
Benefits of using Price action
- Asset’s priceencompasses the entire needed information to trade and get profits from it.
- The patterns are the same. Once you learn to recognize a pattern, it will always have the same meaning and call to action.
- The patterns anticipate the next price moving direction by a great certitude. Being able to know what will happen in the market of what will be the next price for assets give you a fantastic edge, and you are in excellent position to take advantages of it legally.
- Price action can be used for any trade. Since the asset’s price has all the needed information, it can be used to analyze any stock or assets.
- You can set the time frame to study and review. Price action can go over any period of time for any stock and recognizes with great certitude patterns and the next price moving direction of any reviewed stock.Keep in mind, that the examined period must be set accordingly to the binary options expirations time or stock’s maturity.
- You can test it before applying it. Once you learn Price action, you can use the price charts to probe the patterns and guidelines are right by comparing what happened in the past after a pattern was identified. You should practice this way before bidding any real money to test your readiness for trading using price action.
- You can use this technique with almost any trading strategy.