Price action analysis involves observation of the price movement of a market over a set period of time in order to analyze pricing trends. Recognizing pricing patterns helps investors trade based on the “directional bias” of a market’s pricing chart. Since the economic variables that create price movement can be visually tracked on a price chart, investors can trade on the basis of this price action analysis instead of relying on innumerable other factors that affect the direction of a market.
Price action trading analysis is relevant to any financial market since it focuses on the simple directional action of the pricing data present in all markets. From more predictable markets, such as foreign exchange, to those utilizing multiple pricing patterns, price action analysis improves the chance to find high-probability trades without the need for an in-depth understanding of market data.
About the Author:
Pablo Soria de Lachica is Director of Business Development at Bforex, where he focuses on foreign exchange trading and educating novice traders.