The Ultimate Price Action Trading

 

Price Action Trading

INTRODUCTION To really understand price action means you need to study what happened in the past. Then observe what is happening in the present and then predict where the market will go next. 

 “Regardless of what you may think, all traders are forecasters, just like the weatherman.”

Price Action Trading

The weatherman knows where the wind is blowing from, sees the high and low pressure systems forming over the land, knows the temperature variation, cold front, hot front…you know what I’m talking about, right? Then what does he do? He will say something like “tomorrow, the weather in Edinburg will be mostly cloudy, slight chance of shower and possibly sunny in the afternoon.” 

How does he know that? 

Well, from studying the past data and seeing what the current weather situation is at the moment (and these days, their prediction is more reliable due advanced computer models and weather satellites in space). So traders are like that… If we get the direction wrong, we lose money, we get it right, we make money. Simple as that. So everything you are going to read here is about trying to get that direction right before you place a trade. Before you get started, these are some words that you may encounter: 

Long= buy 

Short= sell 

Bulls= buyers 

Bears= sellers 

Bullish=if the market is up, it is said to be bullish (uptrend). Bearish=if the market is down, it’s said to be bearish. 

Bearish Candlestick=a candlestick that has opened higher and closed lower is said to be bearish. 

Bullish Candlestick=a candlestick that has opened lower and closed higher is said to be a bullish candlestick. 

Risk : Reward Ratio=if you risk $50 in a trade to make $150 then your risk: reward is 1:3 which simply means you made 3 times more than your risked. This is an example of risk: reward ratio.