There are many different kinds of trading strategies you can use as a currency trader. Every trading strategy is different and you must know how they work. Among them, the price action trading strategy is one of the best. This strategy is based on the different forms of Japanese candlestick pattern. If you know how to decipher the candlestick pattern at the important price level, you will be able to execute high-quality trades with a very tight stop loss. When traders learn to use tight stop loss, they can easily increase the lot size, which eventually increases the profit. In this article, we are going to discuss some of the hidden secrets of this price action trading strategy.
Impact of higher time frame
Price action trading strategy tends to work best when it is used in a higher time frame. People who use this strategy in the lower time frame, are not able to make consistent profits due to the fluctuation in the price. However, an experienced trader can easily make a profit in the lower time frame with the help of a reliable candlestick pattern. But this needs to be done in the demo account first. People who have less than 1 year of experience, should open a demo account and test how good they are at reading and using the lower time frame. If the results are satisfactory they can go with the lower time to form a trading strategy or else they should stick to the hourly or the daily time frame.
The smart investors at Saxo Bank love to trade the daily and 4-hour chart. To them, these two time frames provide the best signals for fulltime price action traders. You can try trading in these two-time frame to analyze the result. It’s true, you have to test your patience level but without patience, no one can succeed. The investment business is all about testing your endurance. You must develop strong skills that will allow you to control your emotions.
Riding the trend
Everyone wants to ride the major trend since it provides unique profit-taking opportunities. As a new trader, you might be worried that the trend trading strategy is very hard but once you learn the basics of the price action trading strategies, you will be able to execute quality at any support and resistance level. Before you start riding the major trend, you have to know about the most reliable candlestick pattern. The difference in the Japanese candlestick pattern can create a difference in profit factors. Instead of memorizing the candlestick pattern, learn the anatomy of the pattern, and learn why it works. Soon you will be able to trade with the major candlesticks like a professional trader.
Trade with low risk
Just because you know about the price action trading strategy, doesn’t mean you will be taking high risk in the trades. Taking high risk in each trade can put you at great risk and you might even blow up your trading account even though you are using the Japanese candlestick pattern. To ensure the safety of your capital, take only a 1% risk for the first month. Once you feel comfortable with the trading method, you can increase the risk to two percent and see how things work out. When you lose any trade, try to find the main reason for the losing trade.
Fix the problem and this will allow you to improve your trading strategy within a very short time. People who are always looking for the shortcut method is not going to get any benefit from this system. Stop looking for any kind of shortcut in the investment business because if you do so you are going to be the ultimate loser of this industry. Create a strategic routine and stick to it regardless of the result. Be confident with your steps and never lose hope when trading.