As we all are familiar with the volatile nature of the stock market, there is no room for guaranteed profit and a no-loss situation. With the lack of a safety net, people usually find it risky. They do not want to try their skill (or luck as they believe more in it when it comes to trading), and they miss many lucrative opportunities because of their lack of precise skillset. The usual belief in the world of financial market is this – without the right knowledge of some market indicators, analysis, or external information, you cannot make the most of the money market. But it is not true! Even with the lack of these tools and techniques, you can still bank on the market opportunities with the help of Price Action Trading. Let’s understand its significance.
What is Price Action Trading?
Price Action Trading is the practice when trading and investment decisions are made on the basis of actual price movements of a financial instrument, instead of counting on some other indicator or other external factor. Traders who are involved in this trading strategy, tend to review and read raw price data on charts, for instance, opening & closing prices, highs, lows, and these movement-forming patterns.
On the other hand, because it does not take into account the vital analysis factors, and rather focuses on current and past price movement, the core strategy happens to depend on technical analysis tools. Here is Ashutosh Bhardwaj, a prominent SEBI-Registered Research Analyst who will help you learn some basics of price action trading and how you can reap benefits from the same.
Benefits of Price Action Trading
1. Adaptable: This is one of the biggest advantages of price action analysis that it can be applied to a number of financial means and timeframes. It is easy for traders to modify their strategies that suit different market conditions.
2. Ease of Process: When it comes to price action trading, a trader does not have to depend on complex indicators or systems for analysing raw price data. The simpler it is, the more accessible it becomes for traders who give importance to a direct approach.
3. Risk Management: Price action traders are well-versed with the associated risks in the stock market. Hence they encompass an effective and efficient strategy that ensures the least risk. So they focus on key price levels and use stop-loss order setting techniques.
4. Versatile: On the basis of current and popular market conditions, traders can modify their trading styles. This is the beauty of price action trading which can find ways to accommodate different trading styles that include but are not limited to range trading, breakout strategies, etc.
5. Crucial Point Focus: It becomes a repetitive and crucial task for price action traders to pay special attention to chart patterns, resistance levels, and trendlines, to name a few. This way, they can easily classify and categorise such levels where price may or may not react, helping traders make well-versed decisions about entry, exit, and risk management as a whole.
6. Prompt and Instant: Being different from other traditional technical indicators, price action analysis gives you instant information about the ongoing market trends and state. It comes in handy for such traders who want to bank on changing market conditions at the earliest.
7. Market Dynamics: As these traders spend a lot of time developing a thorough knowledge of how the market usually works, what are its dynamics, when to enter it, and when to make an exit, they tend to foster the psychology of buyers and sellers. It helps them predict future price movements.
8. Applicability: It is another huge advantage of price action trading that this strategy can be easily applied to various timeframes, including short-term intraday trading, long-term swing trading, and position trading, to name a few. Hence its traders have an upper hand in choosing the timeframe that suits their trading goals.
9. Test on Demo: It takes place in the forex market, and with a deeper understanding of the market scenarios, one can identify it without much hassle. You do not need to rely on various indicators to tell you how you can benefit from the market. You just need a desired price setup to configure and execute your market learnings.
Conclusion
Now you might have some more clarity of what exactly is Price Action Trading and how it is going to benefit you if you choose to go ahead with it. Our SEBI-Certified Research Analyst ensures that you learn the best practices and implement the same for the maximum ROI. Enrol in any stock market online course of your choice at Logical Nivesh Academy and get started with your trading career, today.
