One of the most profitable Forex System Trading is the one which exploits Price Action to determine optimal entry and exit levels. Understanding this fundamental concept allows trader to use more advanced strategies which lead to quantify the potential profit targets and exits with proper risk management elements which defines optimal entries and exits with respect to key market levels.
The Price Action method is an extremely profitable and viable Forex trading strategy. The reason why Forex System Trading based on Price Action it is much more powerful and accurate is due to the fact that Price is “Current” and leading indicator. The market moves in a certain way because of human’s emotions like Fear and Greed impacting market direction. This could be measured in equation which is direct relation of lacking of one force over another.
Understanding market structure should be first and foremost, without it, you will often be lost, and trade fundamentally incorrect. There is NO indicator that can replace this essential principle. Anything an indicator tells you is derived from price, so you MUST have an understanding of price itself.
When you are analysing the trade setups as they develop in current period of time, the Price Action will provide you with high probability Forex System Trading setups that can help you time your entries into the market much better and more accurately than most lagging indicator methods can. If you keep trying to interpret several indicators’ representation of past price movement your move will be always delayed and chances on profitable setups decreased. The principle of Price Action and successful Forex System Trading is to enter the market as close to a turning point or trend renewal point as possible.
There are obviously some other complementary methods to Price Action trading Forex. The very best set ups are when several levels converge together. We call these areas confluence zones or confluence areas. This increases the likelihood that our entries and exits are likely to be correct.
Before executing a trade, profit targets and exits should be clearly quantified. Failing to do so will wreak havoc on your trading results. Most novices tend to focus on getting into a trade, but have no idea what to do afterwards. Answer this question. If you had 5 miles left in your gas tank and you didn’t know where the nearest gas station was, would you risk driving around in circles looking for the gas station? Or would you pull over and use a GPS? Well, trading should be the same. Know where you want to go before you enter your trade. Your analysis is your GPS, so make sure you have full tank and let the journey begins…