Day trading profits come from successfully anticipating where prices are going next. We have written about the best indicators for day trading. While price indicators rely on price action, they are calculations based on prior price action. Many day traders ask this: is price action better than indicators for successful trades? Indicators process price action in different ways to come up with, for example, the 50-day, 100-day, or 200-day moving average. Price action tells you what the price is doing now, during the current trading session. So, which is better?
How to See Price Action
Traders who rely on current price action look at current trend lines, the highs and lows of the day, and the degree to which price swings approach or retreat from support and resistance levels. To the extent a live price action trader uses an indicator like a moving average they will consider it to be a support or resistance indicator and trade based on how live price action moves toward or away from that indicator. This is a different approach than starting with a moving average and waiting to see if prices approach or retreat.
How to Read Price Action
Price action trading is based on technical analysis of commodity, stock, or currency prices and not on any analysis of fundamentals that eventually determine prices. While a day trader will be cognizant of underlying fundamentals, profits generally come from changes in market sentiment throughout the day. Thus, traders read price action on a minute by minute basis and apply technical indicators like Elliot waves or moving averages to the degree to which they are helpful.
How to Read Price Action for Daily Intraday Trading
A price action trader is constantly tuned into the psychology of the market. At what point do other traders retreat from trades or pile in with the expectation of profits. Using high and low market swings, trend lines, price bands, and indicators of resistance, consolidation, or support, price action traders respond quickly to swings in price. Because of this “fine tuning” a price action trader may often be among the first to recognize a switch in market direction and be among the first to realize profits.
How to Learn Price Action
As with all aspects of trading and especially of day trading, traders should begin the process of learning price action trading in simulation. When using a platform such as Ninja Trader, a novice trader uses real historical market data to learn how to identify, set up, enter, manage, and exit trades successfully. A good rule of thumb is never to risk your own money in day trading until you have come to the point where you routinely make profits in your simulation trading accounts.
How to Master Price Action
For long term success in day trading the wisest choice is to sign up for a course with DayTradeSafe in order to become a benchmarked professional trader. Success in trading requires that you become proficient in several approaches to day trading, swing trading, and the rest. There are trades for which a price action approach will be the best choice and times when it will not. When you study with DayTradeSafe you will become skillful in the necessary approaches and be able to accurately identify which trading approach fits the market of the day.
How to Identify Demand and Supply Using Price Action
If you are looking at the current commodity futures market from a viewpoint of supply and demand, you can look for buy and sell orders and their prices on the market depth screen. This is your indicator or supply and demand within the current market. This is a useful clue to where the market will be headed next but should be combined with current price action as reflected by trend lines and whether or not prices are approaching or retreating from support or resistance.
Is Price Action Trading the Best?
Price action trading is an excellent approach for very short term trades such as with day trading. It is not really suitable for long term swing trades or long term investing. Successful day traders are skilled in the use of multiple technical analysis tools and are also aware of underlying market fundamentals. While a price action approach may be the ideal tactic, at one point during a trading session it may not be the best choice at all times. In order to be able to successfully, and profitably, sort this out sign up for the trading course at DayTradeSafe and become a benchmarked professional trader.