Simply put, areas of traffic on the chart are marked by several points on the chart tucked into close proximity that could hinder the movement of price — and your chances of making a quick profit on a trade! Violet colored boxes show relatively more open spaces on the chart. Also note the nature of price action itself in the traffic boxes compared to space boxes. On the other hand, it will be choppy and more sideways when it is caught up in traffic laden areas.
This is an important cue in helping understand why some trades will run more than others. When price has more space to run in, it will — provided it, of course, has a reason to move in that direction I am implying that you entered logically. Trading into space also yields another major advantage. You become highly efficient in picking out false signals. To understand this, refer the first couple of lines in the previous paragraph that are underlined.
If you have picked the right trading signal, price should in your direction smooth and easy, and when it does not, you have a very logical reason to pull back your trade management either killing the trade or taking other protective measures. This objectivity goes missing when you are trading in traffic. Not only are you constantly biting nails as price drags and dances back and forth over nearby support and resistance levels and prior bar highs and lows, it also gets hard to distinguish between the regular choppiness of price action and a false signal.
It is often not until you get taken out for a loss that you realize you misfired a trade which is, of course, is inevitable in the probabilities game. This is the first major hindrance a support and resistance level or a trend line that could likely hold price from moving swiftly and smoothly in your direction.
Note that in the charts below, all horizontal support and resistance levels are marked in yellow, and areas of space are marked in Aqua color. Also for demonstration purposes, I will be using common candlestick patterns as trade triggers. I safely assume most technical trades use these formations pretty often in their trading anyway.
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We are looking at a strong looking bullish engulfing bar pattern. Notice the area marked in yellow marking out a clear support and resistance level. Even more importantly, notice the big aqua-colored box just underneath. The criteria that must be met in order for you to put money at risk. That about covers trading strategies.
Here are two great examples of where and what we should be trading when it comes to price action trading strategies. There are several other confluence factors that come into play.
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However the price action trading strategies as illustrated in these two charts are a great place to start. Hopefully this lesson has helped to clarify any misconceptions about what price action trading strategies are and how they can be used. Just remember that every good price action trading strategy should be:. Do you use price action trading strategies?
If not, do you think this style of trading could be advantageous?
Traffic-light — Indicators and Signals — TradingView
Feel free to leave your feedback in the comments section below. All comments on the subject are welcome! Save my name, email, and website in this browser for the next time I comment. Thanks, Colin. Very true. Most new traders are led to believe they need something proprietary if not ground-breaking to be consistent. I was one of them for almost three years…. Thanks Justin. I have been trading for 4 years and have learned some new things. I mostly scalp trades but think the trading strategies that you use sound a lot better! Scalping definitely is stressful and it took a while before I became profitable.
One thing that I have learned is that you have to gain as much knowledge as you can to become a successful trader. Swing trading with price action is certainly much less stressful than scalping.
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And I would agree with you that knowledge is paramount. Hi, Dear Justin, As always, well-defined with objectivity and conceptual clearance. A month ago, I attended your 7 secrets webinar but PAT was not cleared. There are several different ways to trade price action, […]. Am also new to trading and i dont have a single clue about any thing except the blue and red indicators from metatrader 4…i hope i can learn from you. However this time I want to talk about actually reading the news through the price action strategies that form on your […].
We could then have moved to a lower time frame to look for bullish price action to confirm that this level is likely to […]. Thank you Justin. Please what currencies pair work perfectly well with price action?. Thank you.. I prefer it because it tells me the result of any news event. The reliability tends to be a bit lower, but used in combination with appropriate confirming signals, they become extremely accurate.
Trying to chase the price when it goes upside rarely works. That is, unless you know this trick.
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This Forex trading strategy gives you a simple tip so you know whether the price will continue to rise or decrease. This is more of a concept rather than a strategy, but you need to know this if you want to understand what the prices are doing. This offer you a lesson in market fundamentals, which will really help you to trade more effectively.
Currency trading strategies are a game of trial and error. It may be worth trying out the strategies from list above to see if any work for you. However, we will look at two further strategies which tend to be more common than the ones previously mentioned. Many consider scalping to be tiresome and time-consuming. Indeed, not every trader can successfully pull it off.
It may really seem that scalping takes the fun out of the best Forex strategy. If you are on the lookout for a reliable Forex strategy, this might be your safest choice.
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As a day trader, you will dip in and out of the market once or twice a day and always carry a position into another period. Ideally, the profit will come back. You will trade in and out of the Forex markets several times per day. The result is a tiny profit, but that is a profit made in a single minute. The amount and consistency of your overall profits depend on your commitment and reflexes. If scalpers want to truly take advantage of the news releases, they should wait for the most important ones.
When you scalp, you need to remember when GDP, unemployment figures and inflation rates are about to be released. These factors affect trading strategies, particularly in the currency trading market, where scalping can be most profitable. While scalping can certainly teach you to trade the currency market, it takes a lot of time and effort.
When you scalp, you have to sit in front of the computer for long periods of time. Positional trading is an interesting way to trade Forex online. While it can take you only a few hours a week, it can provide you with quite extensive profits.
Positional trading is all about having your positions opened for a long period of time, so you can catch some large market moves. The rule of thumb is to avoid using high leverage and keep a close eye on the currency swaps. With positional trading, you can learn not only Forex trading strategies but also the skills you need to become successful. It is a good method of achieving high profits, but it can also put your emotions to test.
Traders may feel the stress from having their funds affected by short term moves. With positional trading, you have to dedicate your time to analysing the market and predicting potential market moves.