Learning price action trading method in few easy steps

Price action trading is based on the Japanese candlestick pattern. Those who have extensive experience in the retail trading business know very well that the price action trading method allows retail traders to execute quality trades in the market. Being a new trader in the investment world, you might think you know everything. But if you study the price action confirmation signal, you will realize there is a lot to learn about this market.

In this article, we are going to give some amazing guidelines which will help you to trade the market with the price action confirmation signals. Once you learn this technique, you will become more confident about your actions and this will make you a professional trader. Now let’s dive into the details.

Selecting the timeframe

One of the prime mistakes that novice traders make while analyzing the candlestick pattern is related to the selection of time frame. Most novice traders think they can evaluate the market data in the lower time frame and find the best possible trade signals. But if you evaluate the data in the lower timeframe, you have to deal with many false trade signals. You are going to lose money most of the time. To eliminate this problem, you should start relying only on the higher timeframe data.

Use a demo account

You need access to a professional demo account to become good at price action trading. Some of you might be thinking that you can start trading the market with low-end brokers. But if you start taking the trades with the low-end brokers, you are not going to learn the use of advanced tools. Check here and learn more about the professional demo trading account Saxo. By doing so, you should be able to get a general idea about the premium learning environment. Once you become good at analyzing the data in the demo account, you may start learning about candlestick patterns. Practice as long as you want but make sure you know why candlesticks are so significant in the investment business.

Develop a unique strategy

The importance of having a unique strategy enormous. You might have strong knowledge about the candlestick pattern but if you fail to evaluate the market data systematically, you are going to lose money most of the time. To be on the safe side of trading, we strongly recommend the novice traders learn things based on logic. Once you do that, you will realize the importance of having a strategy. Create a simple price action trading strategy in the demo account so that you can trade with confidence.

Risk to reward ratio

Novice traders often ignore the importance of the risk to reward ratio in the price action trading method. Most of the time, they rely on complex strategies and loses a big portion of their capital. Instead of doing that, you should be taking the trades based on 1% risk exposure. Use reliable candlestick patterns to execute the trades at the important support and resistance level. Once you do that, you will become more confident about your trade execution process and thus you will earn more money.

Trade with the trend

Being a price action trader, you should not think that the counter-trend trading method is the most efficient way to make money. If you think like that, you should be losing money most of the time. Professional traders are always good at using trend trading methods. So, try to stick to the existing trend so that you don’t have to lose too much money in real-life trading.

At times you might think that the trend trading method is a waste of time.  To discover the truth, get a demo account and trade against the trend for few months. It won’t take you too much time to realize the importance of using the trend trading technique in the Forex market. So, stick to the existing trend at all costs.