Trading Forex price trading can be defined as trading decision based on short price patterns, patterns created by traders simultaneous reactions, on news and world events. Then, a price action study is a study of human emotions depicted in the Forex price charts and presented to the trader in the form of price patterns that are repeated over and over all time frames and all currency pairs.
Before discussing in detail why exchange rate trading is the way to trade Forex, I would like to discuss technical indicators. Forex traders need to understand that technical indicators are derived from the price itself and as such delay the price action. This means that if you are a tech trader using only indicator-based strategies, then unfortunately you are more than likely to fail in your endeavor to trade the markets for profit. Note that you enter the market too late and close your trades too late when trading with indicators.
When you get a technical indicator from price, you typically smooth out some of the nests and peaks in the price itself, but more importantly, you build inherent delays in the indicator compared to price, it's very important to understand and relate to that point, I made above – technical indicators are delayed and it costs you money.
If you look on the internet search engines, you will find a plethora of indicator-based systems, for sale or for rent, along with quantities of articles, trade robots and other secure fire systems that inform you how to make money using an indicator-based system. This is all well and good, do these methods and systems really make money?
If we accept that over 90% of traders eventually lose money trading or wipe out their accounts trading Forex trading, and if we accept that the vast majority of these people use indicator-based methods to trade in the market, I think it tells tell us something about the indicator based systems themselves.
Indicator systems will help you create smoothness in the markets at best, while pricing methods will help you to be reasonably profitable.
The study of price is then the observation of the traders' activity in the market, this can be seen and produced in the market via the price action pattern. The patterns express the feelings of the traders.
In my next article, I will go into a depth about price and start the discussion and explanation of the different types of pricing practices that I look at every day. Methods that work well in the Forex markets and are easily seen on the charts during live trading.