Introduction
Are you tired of using complicated indicators and technical analysis tools to make trading decisions? If yes, then you are in the right place. Price action trading is a simple and effective way to analyze the markets and make profitable trades. In this article, we will discuss the price action entry and exit strategy in detail.
What is Price Action Trading?
Price action trading is a method of analyzing the markets based on the movements of price alone. It involves studying the price movement of an asset over time to identify patterns and trends. Price action traders believe that all the necessary information to make profitable trades is contained in the price action of an asset.
The Benefits of Price Action Trading
Price action trading has several benefits, including:
- Simplicity – Price action trading is easy to understand and implement.
- Accuracy – Price action trading provides accurate signals for entry and exit.
- Flexibility – Price action trading can be applied to any asset class and time frame.
- Profitability – Price action trading has the potential to generate consistent profits.
Price Action Entry Strategy
The price action entry strategy involves identifying key levels of support and resistance on the price chart. These levels are areas where the price is likely to reverse or break out. Traders use various price action patterns to identify these levels, including:
- Double tops and bottoms
- Head and shoulders
- Triangles
- Channels
Once these levels are identified, traders look for price action signals to confirm their entry. These signals include:
- Pin bars
- Inside bars
- Engulfing bars
- Doji candles
An Example of Price Action Entry Strategy
Let’s take an example of a price action entry strategy. Suppose we are trading the EUR/USD currency pair, and we have identified a key level of support at 1.2000. We wait for the price to approach this level and look for a bullish pin bar or engulfing bar to confirm our entry. Once we have the confirmation signal, we enter a long position with a stop loss below the support level.
Price Action Exit Strategy
The price action exit strategy involves identifying key levels of support and resistance on the price chart to exit our trades. We use the same price action patterns as the entry strategy to identify these levels. Once we have identified the support or resistance level, we look for price action signals to confirm our exit. These signals include:
- Pin bars
- Inside bars
- Engulfing bars
- Doji candles
An Example of Price Action Exit Strategy
Let’s take an example of a price action exit strategy. Suppose we are trading the same EUR/USD currency pair, and we have entered a long position at 1.2000. We have set our take profit level at 1.2200, which is a key resistance level on the chart. We wait for the price to approach this level and look for a bearish pin bar or engulfing bar to confirm our exit. Once we have the confirmation signal, we exit our long position with a profit.
Conclusion
Price action trading is a simple and effective way to analyze the markets and make profitable trades. The price action entry and exit strategy is a powerful tool for traders to identify key levels of support and resistance and make accurate trading decisions. By following this strategy, traders can achieve consistent profits in any market condition.
