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Basic Analysis Using Price Action?

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    Basic Analysis Using Price Action?

    In technical analysis, there are many methods of analysis. One of them uses the forex trading strategy method with price action.

    Maybe at some point you accidentally see a forex trader doing analysis without using any technical indicators.

    It only uses horizontal, diagonal or maybe even vertical lines. There really isn't a single technical indicator on the chart that he noticed.

    What is your reaction when you see it?

    Amazed?
    Wonder?
    Or even consider it strange?

    If you are surprised or find it strange, maybe it's because you are familiar with an analytical model that uses many colorful technical indicators.

    But you need to know, that in fact there really is an analysis method that does not utilize technical indicators at all which is commonly called naked trading.

    The followers of naked trading only use price movement charts (candlesticks or bar charts) as a reference for their analysis, or commonly called price action.

    Well, this time the article tries to introduce naked trading using price action, as one method that (actually) is quite popular among forex traders.

    Price Action
    We start from the definition of price action trading itself.

    With simplified language, price action trading is a trading technique that allows you to read potential market movements and make decisions based on price movements.

    So do not rely on technical indicators.

    This flow develops because it assumes that (mostly) technical indicators are lagging, or late.

    That's because the output of the majority of technical indicators is a product of calculations based on price movements that have occurred.

    In other words, technical indicators provide information based on past price movements.

    Well, maybe there is a question, why do analysis based on information from the past, while the most important factor in trading is what the market is doing now and what are they likely to do in the near future?

    The answer is that by using certain strategies, information on price movements from the past can be used to estimate the possibility of the direction of future price movements in the near future.

    However, the price action method does not use technical indicators that are considered lagging.

    This method only uses chart price movements, usually by studying candlestick patterns or patterns formed from a set of candlesticks or bar charts.

    Examples of Forex Strategies
    The above mentioned that the candlestick pattern is one of the implementation of price action trading.

    Now, I'm trying to give an example of using candlestick patterns as a trading strategy.

    We take the example of using the morning star pattern as a buy strategy.

    Morning star is a candlestick pattern formed by three candlestick charts.

    You can recognize Morning Star as having the following characteristics:

    The first candlestick is a bearish candlestick, which is part of a downtrend.
    The second candlestick is a candlestick that has a smaller body, it can be a bullish or bearish candlestick. This shows that there are "doubts" on the market.
    The third candlestick is a bullish candlestick that is longer than the second candlestick. The length does not need to be the same as the first candlestick, but the close price position must exceed half of the first candlestick body. This is the confirmation of the formation of the morning star pattern.

    #2
    Analysis using price action has its own characteristics because this price action technique is very easy to understand and good, combined with several other indicators, and many traders use this strategy on small timeframes such as M15 and M30

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