Approved for Advanced Traders

Introduction To Price Action Strategy – Where the Game Happens

Introduction To Price Action Strategy for Binary Options Trading

Trading is all about price action but what does that mean? Price action is the motion of prices as traders buy and sell an asset and is represented on a chart. Price action strategies are the simplest form of technical analysis and are at the heart of every strategy used today.


What Is Price Action Strategy

We have reviewed a lot of strategies here on (former and have even done one called Nick B’s Price Action Strategy. What we haven’t done is talk about what price action is and how to use it for strategy. Believe it or not every strategy today uses price action to determine entries, the thing is, most of them use some form of indicator or analysis to interpret the action. Technical analysis is supposed to help clarify the price action into recognizable signals but sometimes can do more to cloud the water than to clear it. A true price action strategy is based solely on asset prices and comes with a chart free of messy  indicators. This does not mean that no tools are used; trend lines and support/resistance are key elements of price action theory. I found a great website describing this type of analysis for forex trading and thought it was just as appropriate for binary.


What is Price Action and How to Learn it – Video


How To Apply Price Action Strategy

This is the most fundamental of all technical analysis. For best results Japanese candle stick charts are recommended as they provide the best view of the market. There are no other indicators used, the charts are naked, which leaves the charts clear of distraction. The author stresses that there are no “holy grails” in trading but says with practice this type of analysis can get you close. Once you have your charts up the first thing to look for is if the market is trending or range bound. To do this simply look at the the highs and lows on the chart. If there is a series of higher highs and higher lows then the market is trending up. If there are a series of identical or nearly identical highs with corresponding lows the market is ranging. Once you determine whether the market is trending or ranging it is time to look for support and resistance. These can help determine if a trade is OK or if it might be too risky. If a bullish trade is too close to resistance it may be too risky; if a bearish trade is too close to support it may be too risky. Once you decide what trade to take the next step is to wait for a candle stick signal to enter the market. For example if the market is trending up then you would want a trend following signal, the same for a down trending market. For a ranging market trading up from support or down from resistance is advisable. Pin bars, doji’s, engulfing bars and outside bars are commonly occurring single candle signals.



Why This Strategy Might Suck

This strategy might suck because it is a bit vague. It doesn’t talk about time frames and only touches on what makes a trend. The signals described are not specific enough for a newbie to follow and could lead to a lot of frustration without further guidance.


Why This Strategy Doesn’t Suck

This strategy doesn’t suck because it is good. Price action is what trading is all about and this one article sums up all the key elements of price action and price action trading. Any trader, regardless of style, can benefit from a basic understanding of these principles because price action is at the heart of every trading technique there is. I especially like the last section titled Price Action Trading With Confluence. This is a description of trading using a multiple signals in conjunction with each other just like the convergence of indicators I look for in my own trading.


My Last Words On Price Action Strategy

I don’t think I can say enough about Price Action Strategy. This article sums it up pretty well. Price action is the heart and soul of all trading and something that every trader needs to have a firm grasp on. Once you have the firm foundation of price action principles such as trend, support, resistance and candle stick charting then other indicators can be brought into the system. I highly recommend new traders to focus on price action as part of their education and for more experienced traders to refer back to it as a coincident indicator to other signals they are following.


Further Reading: