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Construction levels for Price Action and methods for their use in trade
To date, there are hundreds of trading strategies, algorithms that use the levels of support and resistance. This can be Fibonacci grid markup Murray or Anna, and maybe even optional straps, but the most reliable ones are considered the levels Price Action.
Before considering the algorithm of applying the appropriate markup to the chart, we will understand what such levels on Forex and why traders pay special attention to them.
From a graphical point of view this term refers to the horizontal line built on some important quote, but as determined by the degree of this significance is a very different question, because you have the following options:
Algorithms describing the motion of prices by mathematical formulas, shows the trader some abstract value, obtained in the result of transformations (as an example, the markup Murray).
Analysis of optional straps to provide estimates, which expect the touch of derivative market participants.
Region of support and resistance that is built by hand, allowing to estimate the imbalance between supply and demand in the current time. This type of analysis is called "levels of Price Action".
Build hands levels for Price Action
The link Price Action and price levels
In one of the previous reviews on the PA technique, I have noted that proponents of this approach draw conclusions about the feasibility of an agreement on the basis of dynamics of quotations and volumes. It is easy to guess that when you build appropriate levels of traders carefully analyze the behavior of prices, in particular:
count the number of times the graph has reached a certain quotation;
analyze the nature of breakthroughs;
compare the size of the bodies of the candles and their shadows.
To list these factors can be very long, as the levels Price Action do not have strict criteria for construction, and every trader recognizes some of the most intuitive and easy techniques.
In fact, Price Action is a bottomless pit of knowledge from which the speculator can get something useful, you just watch a couple of months for the dynamics of prices.
Construction levels for Price Action
However, over the past 10 years, I have developed a set of basic rules, following which you can show sufficiently strong support and resistance, without resorting to additional filters, but all in good time.
The first thing to take into consideration is the role of the timeframe (what it is) – the older it is, the stronger the level of Price Action, for example, the straps on the four hour chart will be by definition more important than the markup on chasovike.
The second rule – role level will become more and more important as you begin to believe speculators note, I'm not talking about his power, and emphasize on the role, as are two different things.
Level testing on Forex
The fact that the obvious bars (which, by definition, high liquidity) is easier to analyze breakdowns/locked as they are processed like a textbook. As for their powers, then it is not so simple, because when many traders think alike (for example, buying an asset on obvious support), the market often starts to go in the opposite direction from what caused the imbalance.
Support on the Price Action method
The third rule is any level the Price Action has a shelf life, so to speak, so within the current time frame should not look too old reference point. If you want to build a more accurate marking, use rule # 1, then the trash on the chart will be less.
The last criterion – reference when searching for extrema in the calculation should take the closing price of candles, not High/Low.
Price action - how to build levels
This does not mean that the highs and lows of the bars we do not need, on the contrary, they play an important role in the search for false breakouts, which always enhance any level. To better understand what is at stake, consider an example.
Confirm the price level
As you can see, before you bounce off the marked Price Action at level the price a few times tested it, while leaving some long shadows – this is a clear indication that the sellers are not strong enough to break support. On the contrary, every wave of sales followed by an equally strong wave of purchases, that is, market participants would consider the fact touch this bar as a good chance for the profitable investment of capital.
Strong level for the Price Action
The second type of breakdown is different in form, but their meaning is interpreted similarly, it looks as follows:
An example of a false breakout of the level of
Here we see an attempt to close beyond the level, which creates the illusion of penetration, but the next candle puts everything in its place – the price returns to the previous range.
From the standpoint of Price Action, levels of this type are the strongest, as evidenced not just by the weakness of the hand, attempted to break through some level, they indicate the willingness of opposing forces to go in an aggressive "offensive."
And the last thing that should be taken into account in the process of using Price Action levels is the key area, i.e. structures consisting of two levels, inside which allowed for some price fluctuation.
How does the pricing area
They play an important role, as the pulse-forming strong players often gain a position in a range and not at a fixed level, and therefore analysis of such situations gives more accurate results.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 646
| Rating: 0.0/0 |
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