Price action in Forex actually is the basic forms of forex. It’s also one of the most widely used strategies in today’s financial market. It’s the ‘behaviour’ of ‘price’ which defines the market movement, identify its trends and key support and resistance levels. Price action trader make a trading decision based on the price movements in chart.
They only use ‘naked’ chart to analyze the market and won’t use indicators or other methods of analysis. Some traders actually believe that the only true source of market information comes from the price itself.
Price action which is analyzing the price bars is perhaps one of the simplest, yet the most effective strategies. It is essential to understand and research the type of candlestick to fully understand the form of candlestick.
The above image illustrates how the shape of a candlestick is read. If you were to view a daily chart of currency pairs, the candles above will reflect full day of trading value. Both candles give a lot of information to a trader:
🟡 The high and low price levels tell us the highest price and lowest price made in the trading day.
🟡 The seller candle, shown by a black, or sometimes red, body tells us that sellers won the battle of the trading day’s war. This is because the closing price level is lower than the opening price level.
🟡 The candle of the buyer, represented by a white or sometimes green body, tells us that the buyer won the trade battle. This is because the closing price level is higher than the opening price level.