The art of price action trading
Price action trading is an art, they say. The mystery that surrounds price action trading is appealing to young traders. There is something about the fact that some people can make money off the markets simply by looking at candles going up and down that attracts the attention.
While price action trading is indeed very profitable for a select few who have learned to trade it perfectly, it’s also a very dangerous path to go down to for complete beginners. Let’s see why that is.
What is price action trading?
It’s all in the name. Trading price action is to base trading decisions solely on price movements. A price action trader doesn’t have any indicators on his charts. The only indicator he looks at is price going up or down.
The idea behind it is that price action should actually be the only information you need to make good trading decisions. Everything can be seen in the way the price of an asset moves. Indicators are just pretty representations of things you can actually see in the movements, and often times they are lagging (ie: they give you information about the market when it’s too late, when the information isn’t relevant anymore) or simply cloud your charts and prevent you from seeing anything.
Why is price action trading an art form?
Price action trading can be compared to an art form for many reasons. First of all, it takes a long time to master. Remember, you have nothing on your charts. You need to learn to spot things happening in the market just by looking at the price movements.
Second of all, price action trading relies a lot on interpretation and experience. One experienced price action trader might spot a perfect momentum trade opportunity while another experienced price action trader might decide to sit back and wait for a rejection.
All in all, while price action trading is very attractive and intriguing, remember that it will take many hours of practicing and dedication to master.
Is price action trading in binary options possible?
Price action trading is a fairly common practice amongst experienced traders. Some of the most old school forex or stocks traders only trade price action based strategies and have been doing so for many years.
With the recent appearing of binary trading though, these traders have found a new way to profit from their wealth of experience. Is price action trading in binary options possible? The answer is a definite yes!
How to trade a price action based binary options strategy
The first thing you have to keep in mind is that binary options have many, many options available. You can trade as low as 30 second expiries and as far as one month expiries, and there are a plethora of different ways to trade (one touch, high/low, Ladder and so on).
You will have to pick one and stick with it. Build your price action strategy around the way you wish to trade and the one that makes the most sense to you.
The most common way to trade binary options is the high/low option. Basically you’re predicting that the price will go either higher or lower than the price at which you placed the option.
Given that, as we said earlier, you can place short term trades (5min/15min), price action traders will thoroughly enjoy momentum trading on these expiries.
The strategy, in a nutshell
This is a solid strategy, but one which requires experience and discipline. The idea is to use price action based levels (support, resistance, trend lines) and trade momentum breaks off them using short term expires on your binary trading account.
Let’s say for instance that AUD/USD is approaching a strong support area. The price finally pushes through and breaks down below the support area. This would be a perfect time to place a short term put option trade (for instance 15min expiry ). This will take advantage of the strong downwards momentum offered by the break of the support area, which should net you money as you manage your trade accordingly!
Whats your experience with price action? Do you trade price action? We would love to know;) Please leave your thoughts and comments below!