Price Action is one of the simplest and most effective investment strategies most often used to play in the Forex market. It is based on only observing one indicator, which is why it is often referred to as bare trading.
The most important indicator is the price of a given instrument. Price Action is a simple strategy that anyone can learn and therefore anyone can make money in Forex. This strategy can be used to analyze any currency pair in the Forex market.
Key concepts associated with the Price Action strategy:
1. Swing High is a three-candlestick pattern where the midpoint of the candlestick is higher than the highs of other candles.
2. Swing Low is a three-candlestick pattern where the middle low point of the candlestick is below the low points of other candlesticks.
These patterns describe the locations of the next highs and lows. With Swing Low and Swing High, you can determine the current trend in the market.
Other terms related to Price Action that you should know:
- A higher high is a candle whose high is higher than the high of the previous candle.
- A higher low is a candle whose low is higher than the low of the previous candle.
- A lower high is a candle whose high is below the high of the previous candle.
- A lower low is a candle whose low is below the low of the previous candle.
If the aforementioned systems are associated with the Price Action patterns defined above - Swing High and Swing Low, the next higher highs and higher lows indicate an uptrend, and the next lower highs and lower lows indicate a downtrend. When none of the above patterns are present, there is a sideways trend or the formation of a triangle, rectangle or flag.
A pin bar is a single candlestick with a long upper or lower shadow. It illustrates a situation in which one side of the market gained a significant advantage during the session and changed course a lot, but by the end of the session it had lost all (or most) of the gained advantage.
Internally, a Bar is a candlestick or a sequence of candles entirely contained in any of the previous candles. An inside bar usually means that the market is hesitant at the moment. A breakout of the Inside Bar pattern can be a good buy signal.
This is all the basic information about the Price action indicator strategy.
