How to Make Money By Trading With Price Action

Making Dough with Price Action Trading.

If you ever come across a trading strategy, you will often feel extremely overwhelmed with indicators, volume patterns and excess noise which is not needed. The problem with indicators is they are not current- they are only lagging indicators. (such as moving averages, stochastic indicators etc.)

What is Price Action? Price Action is the following of the Price, and only the Price! (best used with a bar chart of candlestick chart.) and using maybe one or 2 other indicator (keeping it simple). Using the Price Action you can find resistances, supports, and other areas of previous price patterns. The ideal chart I use for Price Action trading is a Bar Chart. But use whatever suits you best.

The left side is always the open tick, the right side is the close tick, and the main ‘body’ is the lowest and highest price of the day, bottom to top.

Price Action with Bar Charts. A couple of Price Action patterns to watch for are the Bullish Outside Bar, Inside Bars, Bearish Outside Bar.

Bullish Outside Bar

The most powerful Price Action Trading strategy is reading these bars. This is when the second bar completely engulfs the previous bar but is CLOSING HIGHER. This is Bullish (upward trending) and can be a good start position if at the right point in the resistance. Draw a line of all the previous Resistance and you will see where this point is. Resistance is areas where the price reached but could not breakthrough, Multiple times. The more times the price has tried to move through the Resistance the stronger the breakout will be.

Inside Bars

Another great Price Action Trading indicator is the Inside Bar. An inside bar is a neutral bar , which indicates ‘indecision’ in the market in question. There are equal buyers and seller (for the most part) and the bulls nor bears want to make a move. These type of bars will last a while, and are perfect bases for the next upward or downward move. Watch them closely and draw your trend lines and support lines for trend directions.

Bearish Outside Bars

This is when the bar on the right completely engulfs the previous bar, but is closing below the previous bar. This is a bearish move (to the downside) and can often be used as a short entry, if used in conjunction with ’support’ levels. Look back at your chart to find an area with multiple support breaches. One bar might not be enough (for a short entry) you might want to wait for a confirmation also from more bearish outside bars.

Learn more about Price Action Trading. Stop by Ryan Willis’s site where you can find out all about Understanding the Stock Market and what it can do for you and your success as a trader.