Price Action Trading: A Beginners Guide to Strategies, Tips, and Professional Tools
Price Action Trading is a well-liked approach to trading financial Markets that purely relies on Price movements without the use of complicated indicators or other technical analysis tools. It is a simple but effective way to understand how the market behaves and helps you make informed decisions.
If you are a newbie in trading, this beginner’s guide will provide you with the strategies, tips, and tools to get started. You will learn how to read Candlestick charts, identify key Supply and Demand levels, use Price patterns for Entry and exit signals, Manage risk effectively, and much more.
Whether you are interested in trading stocks, forex, crypto or commodities, this guide will equip you with the knowledge and skills needed to succeed in today’s fast-paced markets. So let’s dive in and discover the exciting world of Price Action Trading
Introduction: What is Price Action Trading and Why is it So Popular Among Traders?
Price action Trading involves analysing Price patterns without relying on any technical indicators or other technical tools. Price action traders believe that price is the most important factor in determining future market movements, and by understanding its patterns and behaviours, they can make informed trading decisions. With its simplicity and effectiveness, many traders have found success using this strategy to navigate the financial markets.
Conventional Technical Analysis Tools and Indicators are often lagging since they are derived from the price itself. Hence, Price action traders have a definitive edge over other technical Indicators and tools
Trading Strategy
Unlock the power of price action trading with Supply and Demand Trading!
Supply and Demand Trading is a Price Action Trading concept wherein
Traders analyse chart patterns with the help of Supply Zones and Demand Zones.
This type of Trading is also called Follow the Footprints approach (FTF) , Smart money concepts and likewise, for our understanding we will call this Supply and Demand Trading Strategy.
We do not use any Conventional Indicators or oscillators for trading this strategy
We do not use any Conventional Indicators or oscillators for trading this strategy
- Rally – Base- Rally (RBR)
- Drop-Base-Rally(DBR)
- Rally – Base-Drop(RBR)
- Drop-Base-Drop(DBD)
Read Also :Price action trading concepts to understand further.
Logic Behind Supply and Demand Zone Trading
The practice of Supply and Demand Trading involves the identification of specific zones where supply and demand are concentrated. These zones are determined by major institutional players such as Big Banks, Hedge Funds, and other Financial Institutions. Due to the large size of their orders, these players often struggle to secure favourable prices for their investments.
Therefore, they tend to invest periodically in order to achieve an average price over time. By analysing these zones and the behaviours of these influential players, traders can make informed decisions about market trends and potential investment opportunities.
We as retail trader’s need to scan for such zones, and participate along with the institutions. Let’s Understand with the help of an Example
In the above chart example, we planned a Long trade on NMDC on 125 Min time frame, our Automated Supply and Demand Zone Indicator Plotted these Demand Zones. Prices retraced to Rally- Base- Rally (Demand Zone), we as retail traders can participate in the Bull run when the Prices retrace back to the Demand Zone.
Let’s See a Short Trade Example
The image below depicts a successful short trade we executed in natural gas on a 15-minute time frame. Our decision was based on the presence of a short trade opportunity that offered a remarkable 5:1 reward to risk ratio, thanks to the effective use of supply and demand zones. We achieved this outcome without relying on lagging indicators or oscillators.
Instead, we honed our skills in identifying price action patterns that enable us to make informed decisions with better returns and risk management. It is crucial to learn such techniques to improve your trading outcomes and achieve your financial goals.
One notable advantage of this particular approach lies in its versatility, as it can be successfully employed across a wide range of assets such as Futures & Options, Equities, Commodities, Forex, and Crypto.
Furthermore, this strategy can be effectively utilized at any given time frame, making it a highly adaptable tool for investors and traders alike.
Let us see some more Examples of the Live Trades we have taken
In the above trade for M&M FIN, a Demand Zone Formed (Rally Base Rally) on 125 min time frame. We took this trade when prices retraced back to the Demand Zone, made a reward to risk of 5:1
Another strong Demand Zone, Identified by the Supply and Demand Indicator. A Drop base rally, Prices retraced back and gave us a explosive move of more than 5:1 reward to risk ratio.
Another Supply zone, in EUR/JPY 240 min time frame, Price came to the zone sharply and gave us a reward to risk of more than 7 :1
Why Price Action Trading has an edge over Conventional Trading?
Price action Trading focuses on analysing and making trading decisions on the basis of Price movement and certain patterns in the market. It doesn’t rely on any Lagging Indicators or Oscillators or other conventional tools. Here are some reasons why Price action trading has an edge over other strategies
- Simplicity – Its Simple and easy to understand
- Direct Interpretation– Because Price action reflects the Collective Psychology of the market and market sentiments, price action traders can gain insights into the market Sentiment
- Flexible: Price action Trading can be applied in any time frame and any market
- Reduced Lag: Many conventional trading methods rely on lagging indicators that use past price data to generate signals. Price action trading focuses on current price movements, reducing lag and providing a more real-time analysis of market conditions.
It’s important to note that price action trading, like any trading approach, has its own limitations and is not a guaranteed path to success. Traders still need to develop their skills, practice proper risk management, and remain disciplined in their approach.
However, many traders find that price action trading provides them with a clearer and more intuitive understanding of the market, giving them an edge over more complex and indicator-driven trading methods.
It is always important to note that, there are many other factors that need to be considered in the Trade Planning Process. Factors such as Multiple Time Frame Analysis, Location, Trend, Quality of a Zone, Decision Matrix, Power Patterns, Market Traps etc. are an integral part of the entire Trade Planning Process. Blindly taking a trade just because there is a Demand Zone or a Supply Zone can be Disastrous.
Many new traders who trade Supply Demand Zones, without knowing the complete strategy, feel that Supply and Demand Strategy doesn’t work. That’s not the case half knowledge is always dangerous. It works wonderfully well provided one follows the entire Trade Planning process to identify High Probability Zones. The beauty of this Strategy is it can be applied in any market and any time frame be it Forex, commodities, Derivatives, Equities etc.
Also Read : Gap Trading Strategies
Tips to Succeed
Why do Most Trader’s Fail when they Start Trading?
The importance of psychology in trading cannot be underestimated, as it accounts for 70% of a trader’s success. Technical analysis, on the other hand, contributes to the remaining 30%
By understanding the reasons behind trader failure, we hope to provide valuable insights and lessons that aspiring traders can learn from.
- Lack of Discipline leads to Failure
Discipline is a crucial element for any trader who wants to make consistent profits in the stock market. Without it, traders may make impulsive decisions and stray from their trading plan, leading to significant losses.
- Overconfidence and greed cause losses.
Many inexperienced traders believe they can beat the market and make huge profits in a short amount of time. This often leads to making impulsive decisions without doing adequate research or analysis.
3. Failure to manage risks.
Trading in the stock market is inherently risky, and there is always a chance that you could lose money. However, many traders fail to recognize these risks or underestimate their potential impact. They may take on too much risk by putting all their eggs in one basket, investing too much money in a single stock, or not taking into account the potential downsides of an investment.
MAK Trading School’s Professional CORE STRATEGY PROGRAM
Introducing the extraordinary CORE Strategy Program – a one-of-a-kind journey into the captivating world of supply and demand trading strategy. Whether you’re a seasoned pro, a hardworking professional, or a skilful homemaker, this comprehensive course has got you covered from the very basics to the most advanced levels.
It’s designed to empower anyone who desires to step into the exciting realm of the market and start trading like a true champion. Get ready to embark on an exhilarating adventure where knowledge meets opportunity!
Tools for Trading
MAK Trading School’s Automated Supply and Demand Zone Indicator
The Supply and Demand Zone Indicator is MAK Trading School’s revolutionary Trading Tool. Designed for Price action traders who want to trade and Identify High Probability Supply and Demand Zones in just one click.
One must note that the Indicator is just the Starting point and all the Zones marked by the Indicator should not be traded blindly. One must combine it with other Key Factors to identify the right trade setups.
Click here to Subscribe for the Supply and Demand Indicator
MAK Trading School’s Automated Supply and Demand Zone Screener
The Supply and Demand Zone Screener is a highly effective tool that enables traders to identify stocks and trading instruments that are situated within or in close proximity to supply and demand zone levels. This invaluable resource boasts a straightforward and user-friendly interface, and has already garnered widespread popularity among numerous seasoned traders.
Click here to Subscribe for the Supply and Demand Screener
Conclusion
In conclusion, trading in the stock market can be a challenging and complex endeavour, and many traders fail for a variety of reasons. Some traders lack discipline, while others don’t have a solid trading strategy in place. Emotional biases can also play a significant role in trader’s failure. However, by developing a sound trading plan, sticking to it, and managing risk effectively, traders can increase their chances of success in the market. It’s essential to remain patient, maintain discipline, and seek out quality education and resources to enhance your trading skills and increase your chances of success.
Website: www.maktradingschool.com
Email: support@maktradingschool.com
Contact us: +91 7400088842
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