Price action trading is almost everything

23 нояб. 2020 г.

I am sure you’ve probably heard about price action trading. It’s not the name of an American action movie 🙂 You will read price action on every financial web site and media when they refer to the movement of any stock of Forex cross pair. Price action is the movement of the underlying stock price plotted over time. It is said to form the basis for all technical analysis of any stock, commodity, futures or any other asset.

Many traders like me will rely exclusively on stock price action and supply and demand imbalances to make trading decisions. Candlestick formations and trend analysis is a very powerful weapon you must have in your stock trading arsenal. It can help you a lot at making trading decisions.

Price action trading requires patience, moreover if you are a supply and demand trader like me. We will see strong moves in a given direction and then once the movement has been made, I will have to wait for the pullback. That requires time, even more so when using timeframes like the weekly.

Trading price action requires a lot of practice. The underlying candlestick formations can tell us a lot about the market players involved in any move. You can see such an example in the stock price action analysis shared below for American Electric Power (NASDAQ: AEP) stock. This American stock is a major investor-owned electric utility in the United States of America, delivering electricity to more than five million customers in eleven American states.

Pay attention to the price action on American Electric Power (NASDAQ: AEP) stock. There bullish impulse drawn in blue is said to be a demand imbalance. The strength of the bullish move is made of several wide candlestick bodies. It’s the strongest formation that has happened on AEP for months. Hopefully, it will play out nicely. So far, it’s trying to rally. There is a lot of profit potential.