Spend sufficient time on price action analysis

23 Sep
Price action analysis

When you are position sizing a trade, price action analysis will help a lot. It is important to manage the proper placement of the trades to ensure the safety fund’s safety. You might be new to the trading industry still you need to find the proper entry and exit point of the trades. Moreover, you also need to set proper stop-loss and take-profit. Those two tools will help to deal with any uncertain change in the price trends.

Apart from the trade setup, you need to spend a significant amount of time on a proper market analysis. It is important to ensure the proper placement of the trades. If you can trade with a proper plan and do a proper technical analysis. It does not mean the unimportance of fundamental analysis.

To trade in Forex, you need to understand the market volatility like the pro traders. Fundamental analysis helps with the research on market volatility. The technical analysis is necessary after you have learned about the market condition.

With the strategy of price action trading, you can ensure a proper position sizing of the trades. As a benefit, you can also avoid improper signals and trade with them. This article will mention some important factors related to price action trading.

Develop a proper trading mindset

For every rookie, it is important to concentrate on the trading process. It will require a proper focus on the trading plan and risk management. The return from the trades must not influence your trading strategies. It will improve trading performance by a significant margin.

You will have compassion towards the trading money. So, you will follow a decent risk management plan with minimal leverage to the orders. The expert’s opinion on a 2% risk per trade with a 1:20 leverage will be acceptable for you. With this strategy, you will concentrate on a decent risk to reward ratio of 1:2.

When the trade setup is ready with proper plans, it would make you focus on the position sizing of the trades. At that moment, you would concentrate properly on the price action trading.

The Forex traders need to emphasize on the trading performance to ensure quality execution. It is possible improve your trading performance when you learn trading using a Forex demo account. So, improve your trading quality with a proper interest in the trade setup and the trading plans.

Importance of technical analysis

You need to spend less time on the trade setup to improve the trading performance. Aside from the trade setup, the market analysis is needed for every execution of the trades. Before any position sizing, you need to spend a significant amount of time on the market analysis.

We have already discussed that it is needed for understanding the market volatility. In the system of market analysis, you will need to work with fundamental and technical analysis. As we speak, the fundamental analysis would let you understand the market condition properly. As multiple price driving catalysts are influencing the price movement, you can research on the markets properly.

The main duty comes with technical market analysis. As it is important for the price action trading, you would need to focus on the technical analysis tools. With the skills and knowledge of the technical analysis, you need to ensure a proper position sizing of the trades.   

Proper tools must be used for trading

In the case of the price action trading, you will need to make proper use of the tools. Besides the tools, you must have the idea of the market conditions. If there is a doubt, you need to think of the tools. Oscillators like RSI, ROC, and MFI would help you to understand the market volatility. Alongside the oscillators, you need to use the common chart patterns, indicators wisely. Moreover, the simple technical analysis tools like the Fibonacci retracement, trend lines, and trend zones would help to trade efficiently. You will just need to show your interest in a secured trading strategy.

Price action analysis photo credit: Dean Hochman on Visual Hunt / CC BY

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