7 Reasons Price Action Is Awesome
There are three main types of analysis which are used in trading: technical analysis, fundamental analysis, and price action. Personally, I have always adhered to price action. I am not here to try and convince you that price action is the best or that it is somehow superior to the other types of analysis. You should use whatever works for you; the superior method is the one that works for you. If you are still searching however and have not tried price action, my hope is that you will give it a go. Here are 7 reasons I recommend it.
1. It is easy to learn.
Seriously, you are not going to find an easier trading method to learn than price action. Now, this does not mean it is easy to master; like any other technique, it takes time and testing. But the principles are incredibly basic. It takes seconds to learn what a particular price pattern looks like.
Compare this to the uphill struggle of learning fundamental or technical analysis. Some technical systems are pretty simple and straightforward, but many of them are incredibly elaborate and require you to learn a whole set of indicators separately and then together. As to fundamental analysis, where do I begin? If you do not actually have an economics degree, you will need to do the equivalent of getting one on your own. And even if you had one, that still might not prepare you for trading based on fundamental analysis.
Price action saves you from having to pick up a lot of technical knowledge or develop in-depth economic awareness. If you are intimidated by the learning curve with other systems, give price action a try. I think you will like it.
2. You can focus on learning one pattern at a time.
It is also easy to pace yourself when you are learning price action. If you want, you can start small. Just pick a single price pattern and learn it inside and out. Become an expert with how it fits into market context and when it signals an entry. If you can do this, if you can learn just one pattern, you will be able to make consistent money as a binary options trader. When you feel ready to move up to the next echelon, you can learn another pattern. You will then have more trading opportunities available to you.
3. It is the essence of simplicity.
Are you sick of charts that are cluttered with a thousand indicators? Do you have different indicators telling you conflicting information? Do you get dizzy just looking at your charts? Do you have so many indicators that they overlap to the point where you cannot actually read them properly?
Imagine a clear, clean chart with nothing on it but price. You do not actually need any indicators to profit with price action. Most price traders do find a few indicators helpful, but limit themselves to a couple moving averages or MACD, and that is it. You are not going to find a simpler setup anywhere. With a couple indicators and price, you have enough to give you confluence, but you make it far less likely that you will confound the information with conflicting signals.
On top of that, you will finally be able to look at your charts without getting a headache. You will see at a glance what is going on. The clarity on your charts will translate to clarity in your mind. You will finally be able to breathe.
4. Price action is great for long-term trades.
You can use price action at any timeframe, but you will find that it gives particularly strong signals at higher timeframes. That means if you are looking for a system that will let you place long-term binary options trades, price action is the perfect choice. Long-term trading is great both because it exposes you to less random volatility and because it fits better into many traders’ busy schedules.
5. You are allowing price itself to drive your trading.
Many methods of trading the markets are indirect. Lagging indicators take time to react to changes in price. Fundamental analysis relies on accurately gauging the reaction of other traders to news releases. But when you use price action, you are getting your information about market movement directly from price itself.
There is an age-old debate among non-news traders about whether to specifically avoid trading when news is released, or to simply proceed as if nothing has happened. The right answer depends on your system and your test results, but I have found that price action quite often steers me around news-related pitfalls all on its own.
6. No grey areas for entries.
A lot of trading methods give you large grey “maybe” areas for trade entries. There is certainly still some discretion involved with price action entries, and situations where you will not be 100% sure whether to enter or not, but you will find that overall, the entry signals are a whole lot clearer. You will have a list of simple, concrete needs that need to be met in order for a setup to exist. If any of those needs is unmet, you have no setup.
Getting the haziness out of entries has a couple of benefits. Firstly, it stops you from overtrading. You are far less likely to take “bad setups,” because you will perceive of them as what they truly are—not setups at all. Secondly, it stops you from under-trading. You will feel far more certain of the setups you do see, because they are so concrete and identifiable. This will prevent you from missing out on good trades.
7. It is a time-tested strategy.
Another wonderful thing about price action is that it stays relevant. There are price action traders who have literally been using variations of their methods for decades now across different types of markets and trading. What works for binary options trading also can help you to trade Forex, CFDs, and more. Price is at the core of any market, so once you understand price, you can trade anything.
That is a great assurance for the future. You are after all putting a huge amount of time and hard work into mastering binary options trading. You want to know that you will be able to continue to reap the rewards of that hard work in the years to come. Plus, when you can trade in any market, you have the chance to expand beyond the world of binary options if you choose to at some point down the line.
Now you know some of the reasons why I love price action trading. If you are tired of needless complexity in your trading and you want to learn a method which is elegant, relevant, and works great for generating strong entries and long-term trades, then give price action a try!