Price action trading remains one of the trickiest skills to master in the Forex market. This type of trading relies purely on the movement in price of the underlying asset. You have to act upon the changes in price of the currency pair you are trading, using the price charts. More often than not, the price action is the sole determining factor of the trade you decide to make. This is why most traders base their decisions purely on the support and resistance levels for the current price.
Trading Price Action Using Binary Options
You can apply price action trading principles to binary options trading. There are two main factors you have to keep in mind when trading. The first one is the movement of the price of the underlying asset over a period of time. This can be done easily through the price charts available to you in the market. Secondly, you need to keep a tab on how the traders in the market are reacting to the given changes in price over the timeframe you selected.
This is why it is quite common to see the market trend skewing towards either buying or selling and that too in heavy volumes. The reason for this is that price action trading depends greatly on the beliefs of the traders in the market. Though there are many charts and tools available to you for engaging in price action trading using binary options, the best ones remain the candlestick charts and price bars. Due to the way they are created, they can easily be used to interpret what is happening in the market.
Price Action Analysis
Price action analysis remains one of the most important steps on the road to trading price action. As the name suggests, you need to collect and analyze data related to the price action of an asset over a period of time. Once again, you would have to refer to the price charts. Then, you need to analyze the way the price movements have been occurring over the time period and determine the trends likely to occur as a result. Then, you make your trading decisions based on this analysis.
There are several economic reasons why a price movement may occur for any asset. When using binary options, you don’t need to analyze each and every indicator of a price movement. Rather, you can just use the price movements themselves and build your analysis on them. This saves you considerable hassle and time as well. Thus, trading price action using binary options remains one of your best means for trading Forex.
How to Trade Price Action
The million dollar question to answer here is how you can trade price action using binary options. Though it may sound quite technical, the basic premise is actually quite simple and straightforward. Here are the steps you need to follow:
- Find a ‘naked’ or clean price chart. This is a price chart which does not show any indicators at all. All you get to see are the different price movements.
- Analyze the price action and determine which direction the price of the asset is likely to move in. Then, you have to set up a position based on your analysis.
- Use the price charts to project the direction of future price action. For instance, if you use a pin bar price chart, it is used to signal the current trend is going to reverse. You need to take a position accordingly.
These are three simple steps you need to follow in order to get started with price action trading using binary options.
Be sure to check out our latest Binary Options Brokers Reviews. One of these brokers will help you get started trading. If you have any questions regarding each trading site you can always as us for some more information.
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