FxStacey

People always talk about "price action trading" but what exactly does price action trading consist of? Is it simply trading using only price movements such as what Shoot and Brendan do? And if so how many people on here trade using price action?

Thanks

SergeanTrader

Hi Stacey,

I trade in a fashion derived from Shoot's teachings, although I started with the usual indicators. Price action trading is just that, trading off the action that is occuring at certain price levels. Is it hanging around? Is it avoiding a price level like the plague, how fast does it move away? How much volume was behind a certain price movement to get it to a certain level.

I like to think of it as "Value Action." I ask myself where people are valuing the thing I'm trading. If I see a huge move on lot of volume I can assume at the level the move started there were a lot of traders who said "Hey, this is finally valuable, I'm going to buy!" Eventually price will reach a level where they say to themselves "Alright, I made some money, I'm out." These levels spawn the valuations which in turn cause the price action.

Hope that helps,
Jay

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Jampone

Hi Stacey,
Price action consists of understanding what makes prices go up and down ( supply and demand) and of identifying in a chart the imbalence between supply and demand so we can take advantage of the moves this imbalance causes and in conjunction with that we use volume to try to figure out if the majority of the partipants are taking part of that imbalance or not. For example an up move under low volume indicates that there are few participants taking part of the buying, so they can get absorbed fast if the bears step in the market, an up move under high volume would be the opposite.
The reason why we use price action here is because we focus on understanting these principles and once we understand them we feel better not to use indicators ( I used to use indicators, don´t like anymore).

I hope I could answer your question