Profitable Price Action from wisepowder's blog

The purpose of this artice is to teach you my price action strategy. If implemented properly, this strategy can give you consistent profits in the forex market.To get more news about WikiFX, you can visit wikifx.com official website.

　　What is a price action strategy？

　　This trading strategy is a trading technique that allows you to make subjective trading decisions based on price movement. As an example, I look at a candlestick chart and base all trading decisions solely off of that candlestick chart. If I were using a price action technique while trading stocks, in theory I would not even need to know the name of the stock or anything about the company behind the stock in order to decide if I was going to make a trade. The candlestick chart tells me everything I need to know. So when it comes to the forex market, when using this strategy you can ignore news events, interest rates and whatever other fundamental information is out there.

　　Now that I gave you a little bit of information on what price action is, lets start getting into my strategy. The first step is to prepare your charts. On whatever website or broker you are using, open all of the charts that you want to potentially trade. i have the AUS/USD listed below. As you will see, this is a naked candlestick chart on the DAILY timeframe.

　　Quick fact for beginners: Being on the daily time frame means that each candlestick correlates to one day. Look at the picture below. Since each candlestick is one day, the chart shows you many months of price movement. You can set the time frame of your chart to any time frame you would like, but I stick to the daily timeframe for setting up my charts. Now I wont go into details at this time, but when making trades I do look at 4 & 8 hour time frames. It should be noted that price action signals are more reliable when they are seen on longer time frames. For instance, a signal seen on a 1 minute chart is no where close to reliable as the same signal seen on the daily chart.
　　So now you have your chart open and you are on the daily time frame. It is time to add support and resistance lines. Im going to assume anyone reading this knows what a support and resistance line is. If not, a simple google search or the Baby Pips school can explain it. I use both horizontal support/resistance lines as well as diagonal support/resistance lines. From my personal experience, I do believe that diagonal support/resistance lines are more reliable than horizontal lines. The combination of both together is more reliable than either of them by themselves. Below is my AUD/USD with support/resistance lines placed. This ideally should take you only a few minutes to add these lines.

The next step in my trading strategy is to make sure you are following some simple rules.

　　#1. Trade in the direction of the trend. NEVER EVER trade against the trend. Its that simple. Looking at the AUD/USD chart from my last post, you are only looking to buy the AUD/USD.

　　#2. Do not trade when a major news event is coming up. I will do a separate post on this at some point, but for now just understand that major news events cause volatile and unpredictable markets.

　　Daily FX has a great economic calendar that tells you all of the major news events that are going to be occurring. They rank each news event as having low, medium and high importance. Making a trade involving a currency that has an upcoming news event labeled as high importance is a big no no for me. Just as an example, the US Non-Farm Payrolls is a MAJOR news event that occurs on the first Friday of every month. Large price swings can occur during this event. Therefore, I dont get into a trade involving the USD before that news event occurs. Also, if I am in the green on a trade but it remains open as the non farm payroll news approaches, I consider cashing out and taking profits. Its never any fun when an unexpected piece of news information causes your winning trade to go shooting in the wrong direction and you get stopped out.