1.Price action represents collective human behaviour. Human behaviour in
the market creates some specific patterns on the charts. So price action
trading is really about understanding the psychology of the market using
those patterns. That’s why you see price hits support levels and bounces
back up. That’s why you see price hits resistance levels and heads down.
Why? Because of collective human reaction!
2.Price action gives structure to the forex market. You can’t predict with
100% accuracy where the market will go next. However with price action,
you can, to an extent predict where the market can potentially go. This is
because price action brings structure. So if you know the structure, you can
reduce the uncertainty to some extent and predict with some degree of
certainty where the market will go next.
3.Price Action helps reduce noise and false signals. If you are trading with
stochastic or CCI indicators etc, they tend to give too false signals. This is
also the case with many other indicators. Price action helps to reduce these
kinds of false signals. Price action is not immune to false signals but it is a
much better option than using other indicators…which are essentially
derived from the raw price data anyway. Price action also helps to reduce
“noise”. What is noise? Market noise is simply all the price data that
distorts the picture of the underlying trend… this is mostly due to small price
corrections as well as volatility.
One of the best ways to minimize market noise is to trade from larger timeframes
instead of trading from smaller timeframes.See the 2 charts belowç to see what I
mean:
the market creates some specific patterns on the charts. So price action
trading is really about understanding the psychology of the market using
those patterns. That’s why you see price hits support levels and bounces
back up. That’s why you see price hits resistance levels and heads down.
Why? Because of collective human reaction!
2.Price action gives structure to the forex market. You can’t predict with
100% accuracy where the market will go next. However with price action,
you can, to an extent predict where the market can potentially go. This is
because price action brings structure. So if you know the structure, you can
reduce the uncertainty to some extent and predict with some degree of
certainty where the market will go next.
3.Price Action helps reduce noise and false signals. If you are trading with
stochastic or CCI indicators etc, they tend to give too false signals. This is
also the case with many other indicators. Price action helps to reduce these
kinds of false signals. Price action is not immune to false signals but it is a
much better option than using other indicators…which are essentially
derived from the raw price data anyway. Price action also helps to reduce
“noise”. What is noise? Market noise is simply all the price data that
distorts the picture of the underlying trend… this is mostly due to small price
corrections as well as volatility.
One of the best ways to minimize market noise is to trade from larger timeframes
instead of trading from smaller timeframes.See the 2 charts belowç to see what I
mean:
