What is Price Action Trading?
Price action trading relies solely on analyzing price movements without the use of indicators. Traders focus directly on historical prices, patterns, and market structures.
Advantages of Price Action Trading
Pin Bar
Bullish Example:
🔹 A candle with a small body near the top and a long lower wick, indicating strong buying pressure after a downtrend.
Bearish Example:
🔹 A candle with a small body near the bottom and a long upper wick, signaling strong selling pressure after an uptrend.
Engulfing Patterns
Example:
🔹 Bullish engulfing candle forms at support, indicating strong upward reversal potential.
Identifying Levels
Trade Example: Break and Retest
🔹 Price breaks resistance ($50), retests successfully, and confirms bullish continuation.
False Breakouts
Example:
🔹 Price briefly spikes above resistance then immediately reverses downward, creating a profitable short entry opportunity.
Breakout Patterns (Rectangles, Triangles)
Example:
🔹 Symmetrical triangle breakout accompanied by increased volume signals strong directional momentum.
Recognizing Trends
Example: Trading with Trendlines
🔹 In an uptrend, enter a long position when price retraces to a validated rising trendline and forms a bullish candlestick.
Importance of Volume
Example: Volume Confirmation
🔹 High volume on a bullish engulfing pattern breakout significantly increases trade reliability.
Entry Techniques
Exit Techniques
Trade Example: Engulfing Pattern
🔹 Enter trade after confirmed bullish engulfing candle at support; exit at next resistance or measured target.
Importance of Risk Management
Risk Management Strategies
Example: Position Sizing
🔹 If entry price is $100 and stop-loss is at $99, your risk per share is $1. Adjust the number of shares to match your risk tolerance.
Trade Example 1: Pin Bar Reversal
Trade Example 2: False Breakout
Typical Mistakes
Solutions
Congratulations! You have completed your journey toward mastering price action trading. You now possess powerful tools, proven strategies, and effective risk management techniques to trade confidently and profitably.
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Disclaimer: The information and tools provided by Sky Links Capital are strictly for educational and informational purposes only. They do not constitute financial advice, investment recommendations, or an offer to buy or sell any financial instruments. Users should make independent decisions based on their own research and, where appropriate, seek professional advice.
