BAJAJ BROKING
Price action trading is a technique where traders read the price movements and take positions based on current and actual price movements over time. They do not rely solely on technical indicators, like moving averages, oscillators, or pivots, derived from technical analysis.
If price action traders use technical indicators, they give them very little weightage when making trading decisions. They believe that the price and its movements can be the only trustworthy source of information. For example, if a rising stock price shows that investors are buying, the price action will be assessed based on the buying aggressiveness, velocity, historical, and real-time price bids and offers.
Price action is the price movement of a financial asset over time and is a vital component in the analysis. If price action analysis indicates that the asset price is about to increase, traders might want to go long, and they might want to go short if the price declines.
After elaborating on ‘what is price action’, let us differentiate it from technical indicators.
Technical analysis and indicators involve using numerous calculations to predict asset price movements. In contrast, price action uses only the asset price movements. Price action indicators trace trading activity on the chart. Seasoned traders can spot these indicators easily.
Price action traders can follow several strategies. A few of these are mentioned here:
First, price action is about simplicity. Traders need not crowd the price chart with many technical indicators, like moving averages, pivot points, etc. A complex approach might cause stress.
Second, trading decisions based on price action allow traders to trade in real-time, following market movements. It leads to clarity that helps understand what exactly is happening in the market. You can take a position with confidence.
Third, time frames are significant in price action trading. Most traders prefer daily and weekly time frames depending on their preference.
Fourth, signals created by price action are easy to catch. You need not be a master in the field to understand price action.
Price action is a simple trading strategy that helps traders to predict market movements using identified patterns in the stock price movements. Retail traders, speculators, and arbitrageurs can follow this approach for price predictions and speculation for a wide range of financial assets.
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