Trading price action signals is basically trading the movement of price on the stock. It's utilized by many different types of forex traders, trying to anticipate the subsequent movement in price.
Quite simply, price action occurs when price adjusts, i.e., the particular ‘action’ of price. It truly is used in all futures, except for the small securities. Those are a lot more unstable plus harder to determine using ticks.
This is a form of analysis. But. Instead of looking at a second-hand indicator, you look at price only.
In other words, price action trading is a ‘pure’ form of technical analysis since it includes no second-hand, price-derived indicators. Instead of going crazy with the indicators, we deal with first hand data and price movements around different stocks.
This allows us to try and make a prediction on where the price will go next. Although, predicting too much is a bad thing. Profitable trading for swing trades focus on their gut feeling and understanding of how price action works.
These type of traders use past movements and levels of the stock to predict the future movements. The price history can sometimes be broken down into sections: days, weeks, months.
Looking at the bars, the stock will leave a clue as to what is happening or what traders think will happen. Also, checking the option chain helps too.
Dumb it down
Price action traders often use the phrase “Keep It Simple Stupid” in reference to the fact that trading is something many people over-complicate by clouding their charts with numerous technical indicators and generally over-analyzing a market.
There are several different acronyms of price action trading such as: clean chart trading, being a chartist, trading the chart specialist.
This is different than most traders, because we're not waiting on news. The sole focus is on a market’s price action, and the belief amongst price action traders is that this price action reflects all the variables (news events, eco. data etc.) that influence a market and cause it to move. It is too simple to not at least check out price action charting.
Price Action Trading Strategies (Patterns)
Will show you one diagram later.