HomePRICE ACTION TRADINGPrice Action Trading Explained

Price Action Trading Explained


price action trading system is a process for using price data to make buy and sell decisions on a watch list of charts. It attempts to use entry and exit signals that have an edge by creating good risk/reward ratios that lead to profitable trading with wins that add up to more than losses. 

Price action trading is the opposite of using opinions, predictions, and emotions to make trading decisions. It is the process of using what is happening in the market to determine whether you buy, sell, or hold a position. 

There are four primary dynamics in price action trading:

  1. An entry signal based on a breakout, breakdown, or technical indicator. 
  2. A stop loss set at the price level a trade should not go if it is going to work out. 
  3. A trailing stop that moves up a stop loss to lock in profits if a winning trade reverses. 
  4. A profit target on where a maximum reward will be locked in if the price level is reached. 

Whether it is pure price action itself or technical indicators that are derivatives of price action, this is the process of making decisions based on reactive technical analysis not predictive technical analysis. 

Price action traders can use chart patterns, candlesticks, or backtested data to plan their trades and trade their plans.

Price Action Trading Explained
Price Action Trading Explained
Price Action Trading Explained


10 Paul Tudor Jones Price Action Trading Quotes

Paul Tudor Jones is one of the greatest traders and money managers of his generation. He has had no losing years in his primary fund for decades. He was able to more than double his capital under management during the Black Monday Crash of 1987 while others faced huge drawdowns and account blow ups.

Price Action Patterns

Price action patterns are the visual moves that happen on the chart from the interaction between buyers and sellers at different price levels

Things To Look For Before You Place A Trade

Here are five things to quantify before entering any trades. These areas should be based on the parameters of your own time frame and trading system.

10 Price Action Trading Tips That Will Help You Become a Better Trader

The first step to becoming a better trader is abandoning you own opinions, predictions, and emotions in favor of trading the price action itself. Uptrends, downtrends, and trading ranges on charts become more clear when all personal biases are removed.

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