The Price Action Strategy Complete Guide

You’re probably wondering:

“What is Price Action Trading?”

Price action trading is a methodology that relies on historical prices (open, high, low, and close) to help you make better trading decisions.

Unlike indicators, fundamentals, or algorithms… price action tells you what the market is doing — and not what you think it should do.

Now, this isn’t the Holy Grail. But, if you devote time to learning price action trading, you’ll trade with cleaner charts, and can pinpoint your entries & exits with better precision.

Here’s what you’ll discover…

The truth about Support and Resistance nobody tells you

First, let’s define what’s Support and Resistance so we’re all on the same page.

Support – A horizontal area on your chart where you can expect buyers to push the price higher.

Resistance – A horizontal area on your chart where you can expect sellers to push the price lower.

Here are a few examples…

Support and Resistance on EUR/USD Daily:

Support on (USD/CAD):

Resistance on (GBP/JPY):

Also:

Support and Resistance can swop roles.

This means when Support breaks it can become Resistance. And when Resistance breaks it can become Support.

An example…

Previous Support turns Resistance on (GBP/AUD):

Previous Resistances turns Support on (NZD/USD):

But why does it happen?

Because when the price breaks Support, traders who are long are losing money and in the “red’.

So, when the price rallies back to Support, this group of traders can now get out of their losing trade at breakeven — and that induce selling pressure.

And that’s not all because traders who missed the breakout will want to short the markets which increase the selling pressure.

And that’s why when Support breaks it tends to become Resistance.

Make sense?

Now you’re probably wondering…

“But how do I draw Support and Resistance on my charts?”

That’s a good question.

So, here are the guidelines I use…

1. Zoom out your charts (at least 200 bars for me)
2. Draw the most obvious levels (if you need to second guess, then it’s not an important level)
3. Adjust your levels to get the most number of “touches” (it can be body or wick)

Next…

Dynamic Support & Resistance

According to Classical Technical Analysis, Support and Resistance are horizontal areas on your chart.

This is useful when the market is in a range or weak trend.

But in strong trend markets, it won’t work well and that’s where you need to rely on dynamic Support and Resistance.

What the heck is dynamic?

It means Support and Resistance “move along” with the price instead of being static.

For example:

The 20-period Moving Average can act as dynamic Support in strong trending market…

Or the 50-period Moving Average can act as dynamic Resistance in a healthy trend…

Pro Tip:

Dynamic Support & Resistance can also be in the form of Trendline or Trend Channel.

Market behaviour secrets: How the market really moves…

Here’s the deal:

The markets are always changing (I’m sure you’d realize this by now).

It can in an uptrend, downtrend, range, low volatility, high volatility, etc.

But, if you take a step back and look at the big picture, you’d realize the market tends to be in 1 of 4 stages…

1. Accumulation
2. Advancing
3. Distribution
4. Declining

…will continue!