Price Action is the most basic and easy to learn type of technical analysis for those new to the forex trading world. However, not just beginners use this type of analysis; Many large traders who have been "unwilling" to use the indicators eventually return to this method of Action Action. Call it Nial Fuller in the global arena, and Rayner Teo in neighboring Singapore. One of the advantages of this type of method is the absence of lagging indicators that play a role in the decision-making process. So the decision-making process can be more simple, and the trader's mind condition is maintained; And it has become common knowledge that the trader's mind condition influences decisions (both technical and fundamental interpretations) in opening positions. This method can be used in any pair and in any time frame and of course free of cost, because you do not need to buy software / robot / other indicators. And because the system is simple, this method is often also combined with other analysis to enlarge the profit of the traders.
General description
The actual price movement is only influenced by 2 things; Namely the amount of demand (demand) and the number of supply (supply). The law of economics says that: when more demand than supply, then the price of goods will rise; vice versa. A simple example, when approaching the feast, the price of chilli increases dramatically due to the high demand while the number of peppers (supply) remains; And when the chili pepper season arrives, the price of chilli actually drops due to the amount of chili (supply) more than market demand. This simple phenomenon applies universally, including in the realm of Forex. Here is an example:
On the chart above (pair EURUSD, TF 1H), it can be seen that from position 1, the price suddenly drops quickly and then creeps up to position 2, then continue the downtrend.
The initial position at which prices begin to "fall" can be caused by many things; But there is a pattern whereby the price will move back towards the point of "collapse" of the price before continuing the trend.
This 1-2 position we call as supply level; Where when the price touched the level, the amount of supply (supply) too much without any request; So the price will then fall.
Remember: when bids> demand, then the price of the goods (currency) will decrease.
While in the second picture, we can see that when the price reaches the "Base" zone, the price will continue the previous trend. Zone "Base" we call the term demand level; Where when the price touches that level, the amount of demand (demand) is too much without the offer; So the price will then rise.
Remember: when demand> supply, then price of goods (currency) will rise.
Level Determination
Once we understand the application of economic laws in forex, the next step we do is determine the level; Both supply and demand. When the price starts from a point, there will be 4 universal patterns encountered:
Drop-Base-Rally (DBR), which then forms the Demand level;
Rally-Base-Drop (RBD), which then forms the Supply level;
Drop-Base-Drop (DBD), which indicates that there is a change of level / trend on the chart;
Rally-Base-Rally (RBR), which indicates that there is a change of level / trend on the chart;
Optimal level / strong, can be seen from the pattern of DBR / RBD (where the price goes straight up after touching the base). If you are based on these criteria, you can minimize Loss-trade due to the determination of a less than optimal level.
Here's a little practice you can do right now, to give the name of the pattern formed at the circle-marked levels:
After you fill in, you can match your answer with the answer key below.
In this picture, you can find two hidden levels that use DHF and RBR patterns. This pattern occurs when there is a level change; The base formed from the DBD will be the supply level, and the Base formed from the RBR will be the demand level.
Why does this happen ?
As prices move down and touch base, the amount of supply is still higher than the number of requests. So the price is forced to go down to the new base and form a new demand level before it finally rises again.
As the price moves up and touches the base, the amount of demand is still higher than the offer, so the price is forced to rise and form a new Supply level before it finally moves down again.
Steps you can take to avoid open positions in DBD / RBR, are:
Notice the Trend of your chart; Always open position in tune with trend. If the price trend rises, then put only a buy position and wait for the price at the demand level that you have specified.
The more often these levels change type (from supply to demand level, and vice versa), the weaker the level. Avoid opening positions at these levels.
News in forex can be your companion analyzer, so you can see opportunities much faster than other technical traders. Please check Market Reviews to see our latest news reviews.
Strong Discipline and Risk Management is the key. Remember, no trader is always 100% profit from every position opened.
General description
The actual price movement is only influenced by 2 things; Namely the amount of demand (demand) and the number of supply (supply). The law of economics says that: when more demand than supply, then the price of goods will rise; vice versa. A simple example, when approaching the feast, the price of chilli increases dramatically due to the high demand while the number of peppers (supply) remains; And when the chili pepper season arrives, the price of chilli actually drops due to the amount of chili (supply) more than market demand. This simple phenomenon applies universally, including in the realm of Forex. Here is an example:
On the chart above (pair EURUSD, TF 1H), it can be seen that from position 1, the price suddenly drops quickly and then creeps up to position 2, then continue the downtrend.
The initial position at which prices begin to "fall" can be caused by many things; But there is a pattern whereby the price will move back towards the point of "collapse" of the price before continuing the trend.
This 1-2 position we call as supply level; Where when the price touched the level, the amount of supply (supply) too much without any request; So the price will then fall.
Remember: when bids> demand, then the price of the goods (currency) will decrease.
While in the second picture, we can see that when the price reaches the "Base" zone, the price will continue the previous trend. Zone "Base" we call the term demand level; Where when the price touches that level, the amount of demand (demand) is too much without the offer; So the price will then rise.
Remember: when demand> supply, then price of goods (currency) will rise.
Level Determination
Once we understand the application of economic laws in forex, the next step we do is determine the level; Both supply and demand. When the price starts from a point, there will be 4 universal patterns encountered:
Drop-Base-Rally (DBR), which then forms the Demand level;
Rally-Base-Drop (RBD), which then forms the Supply level;
Drop-Base-Drop (DBD), which indicates that there is a change of level / trend on the chart;
Rally-Base-Rally (RBR), which indicates that there is a change of level / trend on the chart;
Optimal level / strong, can be seen from the pattern of DBR / RBD (where the price goes straight up after touching the base). If you are based on these criteria, you can minimize Loss-trade due to the determination of a less than optimal level.
Here's a little practice you can do right now, to give the name of the pattern formed at the circle-marked levels:
After you fill in, you can match your answer with the answer key below.
In this picture, you can find two hidden levels that use DHF and RBR patterns. This pattern occurs when there is a level change; The base formed from the DBD will be the supply level, and the Base formed from the RBR will be the demand level.
Why does this happen ?
As prices move down and touch base, the amount of supply is still higher than the number of requests. So the price is forced to go down to the new base and form a new demand level before it finally rises again.
As the price moves up and touches the base, the amount of demand is still higher than the offer, so the price is forced to rise and form a new Supply level before it finally moves down again.
Steps you can take to avoid open positions in DBD / RBR, are:
Notice the Trend of your chart; Always open position in tune with trend. If the price trend rises, then put only a buy position and wait for the price at the demand level that you have specified.
The more often these levels change type (from supply to demand level, and vice versa), the weaker the level. Avoid opening positions at these levels.
News in forex can be your companion analyzer, so you can see opportunities much faster than other technical traders. Please check Market Reviews to see our latest news reviews.
Strong Discipline and Risk Management is the key. Remember, no trader is always 100% profit from every position opened.
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