What is Price Action and Why We Should Learn it?
As forex traders, we have the challenging task of trading to make profit from the price moves in the market. This entails finding the where (price), when (timing), and the direction (trend). Most traders end up searching the savannah of trading systems adding tons of indicators on the charts that end up looking like an italian spaghetti food fight amongst 5 year olds.
What is interesting is that the answers to these three things we have to find as forex traders (where, when and direction) are all written in the price action. With that being said, we should answer the question of what price action is.
What is Price Action?
Price Action is simply the movement of price over time. It can be as simple as one price candle or over 100’s of candles. It is not time specific but it simply refers to the movement of price due to the order flow of the market. The bedrock of it is the forex market moves because of the big players. Whatever the reason (technical or fundamental), the market only moves because the larger players buy and sell. The combination of all the buy and sell orders, along with the volume is what moves the market.
Unfortunately we do not have access to the total aggregate volume in the Forex market and any broker volume we get is just a small lily pad in the pond – not representing much in terms of the overall gestalt of volume. Thus, since we do not have access to order flow and volume, the bottom line is we have to trade the way the big players do. We have to find out the where, the when and the direction they are getting in.
The good thing about this is we have most of this information right in front of us hidden in the price action. Again, the market only moves because of order flow and its closest relative we could ever court is Price Action. By learning how to read price action successfully as forex traders, we give ourselves the most important piece of information about what the big players are doing and thus can profit from these moves.
As the smaller and medium sized traders, we are simply having to learn how to surf the waves of price created by the bigger ships in the ocean of price movement. Learning how to read price action will be the most powerful tool you could ever develop when it comes to learning how to trade because it gives you the three most important things to trading (the where, the when and the direction). It is only until you master all three of these will you see consistent profits with minimal drawdowns over time. Thus, get an education in price action and learn how to trade the markets successfully.
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