The first thing to do before trading by using Price Action is to know the Candlestick, Harmonic, Support and Resistance patterns. Without having an understanding of those patterns, we will easily make the decision by emotion. As in the trading world, we have to make a logical decision. Therefore, both the price market and trading will be balanced.
Trading by Price Action can be done by three steps as follows.
Check the Price
Checking the price in a timeframe. However, make sure that Price Action is more suitable for Day Trading rather than Scalping. Hence, it is better for you to use the lowest timeframe at D1 up to H4.
Check the Price and Draw the Support and Resistance Lines
After you checked the price, then, draw the support and resistance lines that match with the condition. Support is the lowest level in the price movement, meanwhile, Resistance is the highest level in its price movement. Afterward, you can also check if there is a candlestick or harmonic pattern.
Check on the Buy or Sell based on the Formed Patterns
You can check the buy or sell position based on the formed patterns on the chart. Then, use the support and resistance lines as the measurement of the Target Profit and Stop Loss. A stop-loss can also be placed outside the furthest projection. This means the stop loss is unlikely to be reached unless the pattern invalidates itself by moving too far.
For instance, there is a brief description “in the figure above, there is an ABCD Bullish Harmonic which shows the upper movement of USD/CHF, and the next approximation maximum price will reach the Resistance level. Target Profit can be put into the previous levels before the Resistance level by using Trailing Stop. Meanwhile, Stop Loss can be put into the Support level.
Again, price action is a trading technique in which possibly makes the traders read and analyze the market. Traders are accused to make subjective trading based on the actual and up-to-date price movement instead of using a technical indicator.
This strategy depends on the tool of technical analysis. Therefore, it rejects the fundamental factors analysis and tends to focus on the previous and next price movement.
