Sunday, 3 November 2019

Trading Reference Using Price Action

Here it is, a hot topic for seasoned traders. Of the long time we have been trading, where is the most "trading" reference according to each of you? Is your capital trading purely from the hottest news or the skill in reading patterns of price changes from price action?

Before jumping here and there, we agree first if the trading reference is essentially rooted in technical and fundamental analysis, in other words we don't need to debate indicators A to Z or the effect of inflation on central bank policy, so that it becomes another topic of discussion. If so, what kind of trading reference will we review? Broadly speaking, there are two types of trading reference types, namely; naked chart (polosan chart) and systematic chart (chart is equipped with analysis based on indicators and news). Want to use plain or complete accessories? In order to be clear about the characteristics, strengths and weaknesses of each trading reference, we first describe one by one: A) Price Action Setup (plain, naked chart) Because the notes are plain, the definite source of information is also limited. The focus of the information is of course the chart of price changes, generally the candlestick pattern becomes the main weapon for traders with a reference to trading plain like this.

Eits, because it's plain, it's not just newbie traders who use Price Action Setup, master traders like Niall Fuller hold Price Action Setup as the best trading reference because of its ease and simplicity. The advantage is that the focus of trading becomes directed because the main source of information is none other than the graph of price changes themselves, there is no need to confuse one source of counter information or overlap with other information. The main point only needs to be based on understanding Price Action as a reflection of the strength of the buyer vs. seller and support-resistance levels to determine entry and exit. The drawback, it is precisely the newbie trader will have difficulty in using this trading reference. The lack of clues in determining when they should respond to signals often traps them into unprofitable positions. B) News Trading (systematic chart) News Trading is very difficult to apply to the naked chart, because following the news alone is usually not necessarily enough to indicate when a trader must enter and exit the market according to predictions. That is the reason why news trading depends on other indicators to confirm continuity and reversal of trends.

Also Read : 6 Basic Price Action Trading Frequently Asked by Traders

Momentum-oscillator indicators (RSI, MACD, OBV, etc.) are generally a mainstay for traders on the basis of news trading. They use these indicators to ascertain whether price movements change according to market participants' sentiments towards the latest news or turn around against predictions. The advantage, the use of indicators will clarify the signals to open and close positions. As long as the trader has a neat arrangement and indicator display system, even a newbie trader can immediately "fit in" with the news trading reference. The drawback, fake signals are often raised by one indicator to other indicators, instead of getting a clear signal, instead trapped noise, especially if the indicators are just as long as the pairs overlap here and there, the tail actually makes traders hesitant to determine the position of open and exit.

Regardless of which debate is the best trading reference (there will be no end), every trader has a tendency to perform better with a particular trading reference, even if there are traders who combine news trading with the help of price action as an aide to the entry-exit strategy.

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