price action technique

Price Action Technique allows you to let price tell you what to do.

Price action is sometimes overlooked by new traders, since it is less well known as a trading method than fundamental and technical analysis. Price action doesn’t involve plotting technical indicators on your chart unless you want to. Some traders use them as guides to help them to see the context of events. Others incorporate them into their trading systems in a more direct way. But the main feature of a price-action methodology is that it involves letting price tell you what to do.

Traders who like price action usually appreciate its simplicity. It’s a less cluttered method for trading, and it’s likely to provide fewer or no mixed signals, especially if you keep the charts relatively empty of indicators. Another reason that traders like price action is that it is more direct in some ways than other forms of analysis. Indicators react to price; price is price.

When you use price action to make trading decisions, you search for patterns in the bars which tell you that price is likely doing a certain thing. These patterns aren’t 100% reliable; like anything else, they are fallible. How helpful they are depends largely on the context. In a choppy market, they’re likely to provide you with fakeouts. In calmer seas, they can be extremely reliable. The placement of a pattern is also important. A buy signal right up against strong resistance isn’t as reliable as a buy signal which is bouncing off of strong resistance. Let’s talk about a few different price action patterns you can look for.

Price Action Patterns

  • Inside bars – An inside bar is any bar which has its open and close contained within the open and close of the previous bar. The more of these you can find in a row, the better. A popular formation to look for is the “inside 4 bar,” which is the fourth bar that occurs in this manner. What does this show us? Consolidating price, heading for a breakout. Since it’s hard to know which way price will break out, you typically will want to be prepared to buy or sell. Some brokers allow you this flexibility, while others don’t.
  • Triangular consolidation – This is similar to the formation above, but is characterized by a compressing triangle formation. It may take place over more bars and it may not be an “even” triangle or a perfect one, but it’s usually a good sign of a forthcoming breakout. Once again, it’s tough to guess the direction.
  • Outside bars – There are two types of outside bars to look for—bullish and bearish. A bullish outside bar has an open and close which eclipse the open and close of the previous bar. Its close is bullish, and it signals a call/buy. The opposite is a bearish outside bar with a bearish close. It signals you to sell/put.
  • Pin bars – Picture three bars in a row. Now picture that the middle bar extends either significantly above or below the two on either side of it. This is a pin bar formation. If the bar that is sticking out is pointing up, this is a sell signal. If the bar that is sticking out is pointing down, this is a buy signal. What it means is that price has “tested” the one direction and rejected it, and is now likely heading in the other direction. The bar sticking out represents that test, which is why the signal indicates price is headed the other direction.

In binary options trading, you’ll probably have an easier time dealing with formations that tell you a direction, and not just inform you that a breakout is coming. Check the features offered by the website you trade on though. Some sites allow you to place a trade where you’ll profit if price touches either of two different trigger points. Those can be placed on opposite sides of price, so that you profit if price breaks out, regardless of whether it goes up or down (you’ll lose the trade if price doesn’t break out by the end of the expiry period).

As you learn about price action, you’ll also probably learn to recognize markets which are ranging and which aren’t likely to go anywhere anytime soon. You can profit during these quiet periods by placing boundary trades where you wager that price will stay inside a certain range. If price spikes outside of that range or starts trending, you’ll lose, but if price continues to trade in that range, you’ll win, even though price went nowhere. That’s not something you can do with most traditional forms of trading, so that’s a very cool feature of trading binary options.

Bonus Offer
100% to $300

MarketsWorld Quick Facts
  • 100% Totally Free Demo Account
  • 100% USA Traders Allowed
  • $20 Minimum Deposit
  • $1 Minimum Trade

Trading Details
  • No Deposit Required
  • Licensed & Regulated By The UK
  • 95% Returns - Highest Anywhere
  • Good Reputation & Fast Payouts

Copyright © 2015-2017 -, All rights reserved. Sitemap

Binary trading carries significant risk. Never invest more than you can afford to lose. This site is not financial advice or any offer of financial advice. This site is for entertainment and informational purposes only. By use of this site you agree to hold us 100% harmless for any and all loss. Clicking on links to external sites may result in affiliate income for the publishers of this website. (NOTICE) - This website is not a binary trading website and is NOT owned by any binary options company. We are informational and entertainment only. No trading is offered or solicited by USA REGULATION NOTICE: Binary Options Companies are not regulated within the United States. These companies are not regulated, managed, connected or affiliated with any of the regulatory agencies such as the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC) or National Futures Association (NFA), or any other US Regulatory Body. Please take notice that any unregulated trading acitity by U.S. Citizens is considered unlawful. Trade at your own risk. Risk Disclosure: does not accept any liability for loss or damage as a result of reliance on the information contained within this website; this includes education content, example quotes and charts, and news. Please be aware of the risks inherent with binary options trading and trading the financial markets; never invest more money than you can risk losing. The risks involved in trading binary options are high and may not be suitable for all investors. BinaryTrading does not retain any responsibility for any trading losses you might face as a result of using the information hosted on this website. The quotes contained in this website are not provided by exchanges but rather by market makers. So prices may be different from exchange prices and may not be accurate to real time trading prices. They are supplied as a guide to trading rather than for trading purposes. See our entire Privacy Policy.