Price action refers to price changes in financial assets.
Price action study is a part of technical analysis.
Instead of using chart patterns to identify or apply technical indicators that originate from price movements and have natural lag, price action is about understanding the nature of a trade.
By studying price movements over time, you can get all the information you need to effectively trade trends, breakouts, and swings.
Japanese Candlestick Charts are probably the most commonly used form of price action analysis.
Prices react to all known news, meaning price movements tell you the collective view of breaking news, not the view of a single individual.
The basic belief of price action analysis is that prices are never wrong.
So, if you lose money, you are doing it wrong.
As a trader, your job is to manage this risk and close the trade.
Understanding risk management is a critical step in becoming a better trader.
Not everyone was speculating and reacting to the news.
Every day, billions of dollars are traded through the markets by entities that do not engage in speculative activity.
Maybe it’s an insurance fund rebalancing its portfolio at the end of the month, a central bank managing its currency risk, or a large U.S. smartphone company buying camera sensors from Japan in yen.
Either way, price action keeps a look at all global capital flows and provides an overall picture of the market’s sentiment towards the currency pairs on the chart.
If you want to learn more foreign exchange trading knowledge, please click: Trading Education.
