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Price Action
Table of Contents
2
1
3
4
5
6Putting it in Practice
Trending or Trading
Price ActionWhat is a Price Action?
Supply and Demand
The Art of War and Trading
Support & Resistance
Fire & Ice 7
Price ActionWhat is Price Action?
In simple terms, price action is a trading technique that allows a
trader to read the market and make subjective trading decisions
based on the recent and actual price movements, rather than relying
solely on technical indicators.
DEFINITION
Since it ignores the fundamental factors of an instrument and looks
primarily at the instruments price history it is a form of technical analysis.
HOW IS IT CATEGORIZED?
Price ActionThe theory behind PA
• Price Action Trading is the discipline of making all of your trading decisions from
a stripped down or “naked” price chart.
• This means no lagging indicators outside of maybe a couple moving averages to
help identify dynamic support and resistance areas and trend.
• All financial markets generate data about the movement of the price of a market
over varying periods of time; this data is displayed on price charts.
• Price charts reflect the beliefs and actions of all participants (human or
computer) trading a market during a specified period of time and these beliefs
are portrayed on a market’s price chart in the form of “price action”.
Briefly
Price ActionThe theory behind PA
• The basics of economic theory revolves around the terms ‘supply and
demand’
• The fair value or price of a currency pair is determined by the equilibrium of
supply and demand
• The premise is that the current price is ‘the correct price’. It has to be as this
is where it is trading
Supply & Demand
Price ActionThe theory behind PA
The Art Of War for Trading
“Rouse him, and learn the principle of his activity or inactivity. Force him to reveal himself, so as to find out his vulnerable spots.”
• Consider trading like a conflict between warring nations
• On the one side we have the ‘nation of Supply’ (sellers) and on the other
side ‘nation of Demand’ (buyers)
• Each lining up in preparation for battle. You the trader can choose either
side and when you trade you have chosen a side
• As a trader you are a free agent, a mercenary that can move from one side
to the other
• Price action helps you determine which side to choose
Price ActionThe theory behind PA
• The starting point of every trade should be the determination of the ‘trending or
trading’ phase
• Strip your charts of all indicators and start with a clean candlestick chart
• Pairs will either be trending, moving in a specific direction ..bullish or bearish or
• Trading, which is trading within a specific range
Trending or Trading
Price ActionThe theory behind PA
• Trending is defined as continues ‘higher highs and higher lows’ or ‘lower highs
and lower lows’
Trending or Trading
Price ActionThe theory behind PA
• Trading is defined as a period where prices range between ‘support and
resistance’
• A period of consolidation
Trending or Trading
“In the midst of chaos, there is also opportunity”
Price ActionThe theory behind PA
• Support is a level where the majority of the buyers agree that the price is fair or
cheap and the sellers are not willing to sell lower
• Resistance is the level where the majority of the sellers feel that the price is fair
or expensive and the buyers are not willing to buy higher
Support & Resistance
Price ActionThe theory behind PA
• Support becomes resistance and resistance becomes support
• Major levels will reverse once they have been breached convincingly
Support becomes Resistance
Price ActionThe theory behind PA
• Support and resistance comes in many forms
• Trendlines
• This is a constant level preventing the price to move higher or lower
• A static barrier depicted by a line joining just 2 specific points on a chart and
extending beyond
Support & Resistance Forms
Price ActionThe theory behind PA
• Moving Averages
• MV have the ability to predict short term price action
• Used to identify a moving support and resistance levels only in a trending market
Support & Resistance Forms
Price ActionThe theory behind PA
• Round Numbers
• Round numbers become psychologically important
• Many traders will place stop losses or take profits at round numbers rather than in-
between prices
• Because so many traders are at these numbers they become strong price barriers
• Round numbers tend to change markets from trending to trading being consolidating
in nature
Support & Resistance Forms
“He who is prudent and lies in wait for an enemy who is not, will be victorious.”
Price ActionThe theory behind PA
• Trending or Trading EURUSD
• STEP 1
• Determine if trending or trading – TRADING
Putting it all together - TRADING
Price ActionThe theory behind PA
• Support and Resistance
• STEP 2
• Plot the support and resistance lines
Putting it all together - TRADING
Price ActionThe theory behind PA
• Placing orders
• STEP 3
• Place BUY LIMIT at support 1.1000
Putting it all together - TRADING
Price ActionThe theory behind PA
• IF DONE place Take profit order
• STEP 4
• Place SELL LIMIT at resistance of 1.14700 or incline resistance line of 1.1340
Putting it all together - TRADING
“who wishes to fight must first count the cost”
Price ActionThe theory behind PA
• Trending or Trading USDZAR
• STEP 1
• Determine trending or trading – Lower lows lower highs – TRENDING
• Lower Lows and Lower Highs - Short
Putting it all together - TRENDING
Price ActionThe theory behind PA
• Placing Order at resistance
• STEP 2
• Place SELL LIMIT order at resistance - 15.60
Putting it all together - TRENDING
“So in war, the way is to avoid what is strong, and strike at what is weak.”
Price Action
• Attempts to describe human thought processes invoked by experienced
traders that are not subjected to a specific discipline.
• It is a simplistic method of determining and creating a forecast of probability of
how prices change. therefore the name Price Action.
• Can stand true in theory with almost any instrument but is best based on
markets being highly liquid and highly volatile.
Summarized
• High liquidity shares
• Shares that show volatility and
movement
• Resource sector - trend
• Gold sector – trend
Which shares most commonly are good for Price Action trading?
• Banking - trade
• Financials – trend and trade
• Consumer – trend
• ‘Fire & Ice’ is a Lead trader in the CopyTrade stable
• Fire & Ice uses Price Action as one of its analytical tools
• What is Copy Trade
• Clients can copy lead traders automatically using the Copy Trade service
• Clients mandate Copy Trade to automatically copy the trades of Fire and Ice
• Copy Trade copies based on clients risk requirements and the exact ratio to the lead trader Fire and Ice
• An addendum to the mandate is required giving Copy Trade the right to copy the trades
• There is no cost to Copy Trade
Price Action in ActionFire & Ice Copy Trade
Thank you for attending
Please Join us for the next in the Price Action Series 2
Questions?