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What is price action in forex trading?
One way to predict the direction of price movements is to use technical analysis. Basically, technical analysis uses historical price movement charts or charts to predict the future direction of the price. Technical analysis assumes that the price chart reflects the actions of all market participants involved in trading in a given period of time.Financial markets will usually generate data on market price movements over various time periods. This data is then displayed in a graph on the monitor screen. Many traders are willing to spend time learning and trying out different trading strategies. The further traders go in their search for the best forex strategy, the more and more complicated the techniques they are looking for.
In fact, to be able to identify the next movement, there is a simple method that can be relied upon, namely the price action technique. Well, to understand forex price action, traders must first understand the price movement chart. Price movements can be seen in a chart, it is with this chart that traders will begin to identify the price. Well, this is where the role of price action is needed to help predict the direction of price movements.
What is price action? Price action is a simple method of analysis that is carried out by observing the pattern of price movement of an asset or a currency pair seen on a chart or price chart. Through the price action technique, traders will predict the direction of the next price movement from the existing candlestick formation. So, this technique does not depend on any indicators, for the purpose of confirming the farthest signals traders rely only on support and resistance lines or moving averages.
The most commonly used price action indicator is candlesticks, as it provides traders with useful information such as market opening and closing prices and high and low price levels within a specified period of time. After knowing the price action, you can test your knowledge through the Preliminary Test and test how far you can go in trading!
Getting to know the main candlestick formations for the price action technique
Not only bullish and bearish, the price action technique also analyzes candlestick formations with various unique shapes that can be interpreted as important signals. Here are the three main candlestick formations used in forex price action techniques.1. Pin bar
The pin bar is one of the main candles in this technique because it is the easiest to recognize and is often found on charts. Its appearance is usually characterized by a small body candle and one of the axes extends beyond the size of the body. There are two types of pin bars, namely bearish pin bars and bullish pin bars. Bearish pin bars form at the top and price is identified as a bearish reversal marker, while bullish pin bars at the bottom of price are often interpreted as bullish reversal signals. Pin bars can be very accurate if they form at the support resistance of a price that is experiencing a strengthening trend. In the price action candlestick technique, pin bars are often used to confirm trend reversals.2. Inside bar
Inside bar identified as a candle formation where the high and low levels are in the range of the previous candle. The price action technique with this pattern requires observation on two candlesticks at once, where the first candle is called the mother bar, and the second candle is the inside bar. The inside bar chart indicates the doubts of buyers and sellers who are waiting for each other. Therefore, you should wait until the third candle (as a confirmator) closes to interpret the inside bar signal.The recommended price action technique is that if the confirmator candlestick is close above the high mother bar level, then it means that buyers have taken the initiative to push the price upwards. Conversely, traders could take a bearish move if the third candle closes below the low mother bar level. This condition reflects the victory of sellers in reducing prices towards the downside. Before continuing with the explanation of the Fakey Bar, make sure you have filled out the GIC internal survey!
3. Fakey bar (inside bar and pin bar)
False signals are a possibility that can always happen and therefore every trader should be aware of. In the price action technique, there is a special candlestick formation that can be recognized as a false signal (fakey) indicator. This pattern consists of three candles. The first two candles are the mother bar and inside bar formations, while the third candle is the actual confirmator indicating a false break.Under normal conditions, a confirmed candle closed below the low mother bar should be the beginning of a downtrend. However, this price action technique has proven to be not always correct. In fact, the next price can actually form an uptrend. To avoid this risk, you should pay attention to how the confirmator candle forms after the inside bar. If the formation looks like a regular candlestick, then it is not a false signal marker. But if the shape resembles a pin bar, then be careful. After knowing some candlestick formations, you can invite friends or join an IB in the Affiliate program to get all the benefits of the program.
