Price action – what is it?

Price action is nothing but price action. It is an investment strategy found in the forex market, the operation of which is based on the analysis of price action without the use of technical indicators. The idea behind price action is to study price movements and patterns to predict future situations. This approach assumes that all the necessary information about the market is included in the price chart. It becomes important to study trend lines, support and resistance levels, and candlestick patterns. Investors try to detect the moment that indicates a change in the direction of the trend or its further continuation. The price action strategy will be primarily suitable for investors who prefer a simple approach to market analysis and want to understand how prices behave.

Bollards and their types

Bar analysis allows you to understand the psychology of the market and identify turning points. During the trainings on Webinar Universe, we inform you that it is worth paying attention to the tools that provide and are needed to conduct price action analysis. Bars provide information about how prices change over a certain period of time. Of particular importance are:

  • The white and black bars - white indicates an increase in prices in a given period, and the black bars indicate a decrease in prices. It is an essential tool that makes it possible to analyze market trends.
  • Falling pistils – otherwise known as marubozu falling, it has no top, bottom or shadow. From the indicated bar we will read information about the dominance of sellers. By observing this variable, we can deduce the continuation of the downtrend.
  • Rising posts – called marubozu rising, like the previous one, it has no shadows and shows the dominance of buyers. Observation of the ascending bar allows you to provide information about the continuation of the upward trend.
  • Shadow bars – have both top and bottom shadows. Investors pay attention to the length of shadows, which indicates periodic price fluctuations. Long upper shadows may suggest rejection of higher prices, while lower shadows may suggest rejection of lower prices.
  • suspended posts – their characteristic feature is opening and closing in close proximity, which creates a small body. This is a signal that a balance has been struck between sellers and buyers.

A signal for action

The Price Action strategy, in addition to bar analysis, also deals with the identification of signals for action in the forex market. It's a good idea to choose those that offer effective tools and support. The basic signal is the support and resistance levels. When the chart rises to a higher level, this is the moment when you can expect the price to reverse or break through it. It is worth observing the formations. They tell you when to enter or exit a position. Recognizing them requires some experience. Among the most popular are such formations as: heads and shoulders, triangles and flags.

An important signal is the bars with a large range, deviating from the previous ones, which are a common sign of a decrease in the strength of the price movement. There are also patterns on lower time frames, which are often confirmed by higher time frames.


Convergence and use in the trend

Convergence and trend play a crucial role in forex market analysis. They provide information about price dynamics and are used to make decisions. Despite their differences, they have some common factors. Convergence is when different indicators begin to converge at a single point, which often indicates a signal of a weakening trend or an impending turning point. A bullish convergence can be distinguished, which occurs when the oscillating indicator makes higher lows and the price is lower than the previous one. This can lead to the occurrence of a reversal of the downtrend.

A trend is a common direction in which the market is heading. It is also possible to distinguish between an uptrend, a downward trend, or a sideways trend. Being able to recognize the trend is crucial to making the right decisions in the market. A well-conducted observation can provide information about opportunities to enter or exit a given position.

The main common factor of convergence and trend is the giving of investment signals. Both help investors make accurate decisions. When convergence indicates when direction is changing or weakening, at the same time the trend can confirm the situation. These are the basic variables that are used to conduct an analysis of the market situation.

When choosing the right platform offered by a broker, it is important to pay attention to whether there are indicators and support available for trend analysis. It's a helpful tool to take advantage of convergence and trends. Proper analysis and the ability to recognize signals can lead to high success in the investor market.

Using a forex strategy

One way to use the strategy is to identify trends. From the training platform, you can learn that analyzing allows you to notice current trends in forex. Systematic observation of prices and the behavior of bars gives you the opportunity to find the right opportunity to join the trend. Knowing patterns such as reversals or continuations allows you to see the moment when it is worth initiating trades. This is often a breakout from a resistance or support level.

It is worth remembering that price action is not only a strategy that allows you to notice the moments when it is worth entering the market, but it also provides a lot of information on how to properly manage already open positions. Price analysis allows you to determine at what point it is worth securing profits in order to minimize a possible loss. An important task of the price action strategy is to confirm the signals obtained from other tools. It is often helpful in the analysis of other indicators or technical analysis. Thanks to its use, it is possible to confirm signals coming from the TSI or MACD, which ensures greater security of transactions. The price action strategy is gaining more and more followers day by day. Due to its simplicity and effectiveness, it is eagerly chosen by new and experienced investors.