Price Action is a simple trading method pursued by many Olymp Trade traders. Everything that builds up the strategy is extremely easy to grasp. They include trend, support and resistance, trendline and price patterns…
Those are the things you can see every day on the Japanese candlestick chart. In this article, I will help you understand the basic knowledge of Price Action before using it to trade in Olymp Trade.
Basic knowledge of Price Action in Olymp Trade
To build a solid house, you need to have good bricks. So to build an effective price action trading method, you need to understand the keys that make up the method correctly.
Trend – an important fundamental element of Price Action
A trend is the movement of the market in a certain direction over a period of time. The market has 3 types of trends.
An uptrend is a period in which the market moves up in price over time. When the new peaks and troughs are higher than the old peaks and troughs.
A downtrend is a period in which the market moves downward over time. When the new peaks and troughs are lower than the old peaks and troughs.
A sideways market is a period in which the market moves within a price range over time. When the new peaks and troughs are equal to the old peaks and troughs.
When the uptrend ends, the market can turn to a downtrend or sideways. The same goes for the downtrend.
Support and resistance
Support and resistance are past price zones where the price reversed or slowed down before resuming a trend. That behavior is likely to repeat in the future.
Zones where the price goes up to retest then falls down again are called resistance. Conversely, zones where the price goes down to retest then rises again are called support
At the resistance zone, many traders fear the price will fall again causing them to lose part of their profits so they will make take-profit decisions. That is the right time to open the safest SELL order.
At the support zone, they will buy when they think it is the lowest price and expect the price to rise soon after. That is the time to open a BUY order with a high winning rate.
Trendline is an indispensable tool in Price Action
Trendline is an important tool used to determine whether the market is up or down. It not only helps you identify whether the market is an uptrend or a downtrend but also helps you determine the appropriate time to place buy and sell orders.
A price pattern is a pattern in which price levels are charted. When price data are plotted on charts, they often form repeating patterns over a certain period. Price Action traders discovered these patterns and used them as trading signals.
Price patterns show the overall picture of supply and demand in the market. It is a complete visual record of all transactions. The price pattern provides us with the previous story of the market along with the battle between the bulls and the bears.
More importantly, price patterns also help determine which side is the winner. Thereby, they create trading opportunities for traders.
Reading and understanding the basics of Price Action is one of the best ways to have a solid foundation to help you go further on the Olymp Trade trading path.
If you want to cut down a tree, it is best to prepare well for sharpening the ax. Again, I recommend you read the basics of Price Action carefully. They will help you go faster when it comes to advanced articles and shape your mind most effectively.
Join the Olymp Trade Club signal group: https://t.me/olymptradeclub19
Join the Olymp Trade Club Signal Group: https://t.me/olymptradeclub19