Charts and indicatorsUpdated 2 min readBy the FXNOD team
Price action trading: what it is and how to start
Price action trading means making decisions from the price chart itself, with few or no indicators. The trader reads market structure, the levels where the price has turned before, and how candles behave when the price reaches them. It is a discretionary skill that takes practice, and it applies to markets driven by real buyers and sellers.
The three things a price action trader reads
| Element | Question |
|---|---|
| Structure | Is the market making higher highs and higher lows, lower ones, or neither? |
| Levels | Where has the price turned before, and where is it now relative to those places? |
| Reaction | What are the candles doing as the price arrives at a level? |
A simple routine
Start on a higher timeframe
Mark the trend and the major levels.
Wait for the price to reach a level
No level, no trade.
Watch the reaction
A rejection candle, an engulfing candle, or a failed break.
Enter with the stop beyond the level
Where the idea is clearly wrong.
Target the next level
And skip the trade if it is closer than the stop.
Why people prefer it
- Indicators are calculated from price, so they are always a step behind it.
- A clean chart is easier to read than one covered in tools.
- The same reading works on any market and timeframe.
Its limits
- It is subjective. Two traders see different levels, which makes it hard to test.
- It cannot be handed to a bot without being turned into exact rules, and most of it then stops being price action.
- It takes hundreds of hours of chart time.
- Naked charts make it easy to see whatever you hoped to see.
Keeping it honest
Write down, before each trade, the level, the trigger and the exit. Record a screenshot. Review weekly. Discretion without records turns into storytelling about why each trade should have worked.
Where it does not apply
Price action is the footprint of real participants reacting to each other. A synthetic index has none: Deriv says there is no order book and that historical patterns are coincidental. Reading structure there is reading noise.
Questions people ask
- Is price action better than indicators?
- It is more direct, and harder to define and test. Many traders use price action with one or two indicators as a filter.
- Can beginners learn price action?
- Yes. Start with structure and support and resistance on a daily chart, and add nothing else until those are familiar.
- Can a bot trade price action?
- Only the parts that can be written as exact rules. The judgment that defines the method does not automate.
Put it on a chart
Trade Pilot's chart has moving averages, RSI and Bollinger Bands, and a bot in Bot Forge can use indicators to choose its side. Try both on your Deriv demo account.
Get started