Have you ever been to a city that had a famous red-light district, where super-hot girls are wearing red shirts saying “for one night only” and then hand you a pamphlet? Then it turns out that she isn’t promoting the next gaming convention or Comic Con showdown. Instead, she thought that you needed to “enhance” your nightlife with a little “nightlife” and if you’re underage now would be a good time to turn the page and move on; since kids always do as they’re told I trust that we can carry on.
Everything these days seem to have some kind of angle. Buying a magazine is no longer about what country Brad Pitt adopted a baby from or if Paris Hilton knows what legally blonde really means. The focus these days is not about how good you are in bed but how to make it better! It’s like the universe is literally using a thousand covers to tell you that you don’t rock anyone’s world. It is not just about your bedside manners but also your figure, the way you dress and the petrol you use. It’s like enough is no longer good enough and TODAY is the day to start changing your life! As if eating greens today is going to make those stretch marks magically disappear tomorrow.
Unlike lifestyle and relationship advice, price action analysis is based on facts and numbers and not just someone’s opinion. It is proven to make your life either indefinitely amazing or leave you wanting more. The best part is that you can eat what you want with all the grease and none of the regret; it’s proven to give you a statistical edge.
By using charting, theories, market knowledge, experience and a careful eye we can all be the Warren Buffets of tomorrow.
Where it all began:
Dow Theory, developed around 1900’s from the writings of Charles H. Dow (as well as other Dow theorists such as William P. Hamilton, Robert Rhea and E. George Schaefer) and is accredited as the basis of price action analysis.
It’s interesting to note that Charles Dow never formally wrote down his strategies as a “theory” in the technical sense, this is credited to those who studied his writings (assertions) and their coherence with reality.
What is price action analysis?
Price action analysis is a technical type of analysis which entails the use of price data to forecast future price movements. It is based on the notion that price in itself engulfs other critical data such as economic well-being, and therefore by reading price actions in differing time frames can determine trade entry and exit points, which is the critical part of the strategy in Forex trading.
Price action, in a nutshell, is the use of historical price data to forecast future price movements to allow for a statistical advantage. The analysis part is, as is in most cases, subjective, which is why some traders earn profits in some of their trades while others not as much. Which emphasises the importance of being aware and “in tune” with the market.
Nial Fuller in “Learning to trade price action” summarises this in the following statement “Price action analysis is the analysis of the price movement of a market over time. By learning to read the price action of a market, we can determine a market’s directional bias as well as trade from reoccurring price action patterns or price action setups that reflect changes or continuations in market sentiment”.
1). Nial Fuller, Learning to trade price action