Price Action Is not Just For Day Trading

One thing that confuses many new traders is the fact that price action is not just for day trading.  New traders and even long time traders that are not yet profitable simply do not understand the importance of price action trading, which in reality is nothing more than the ability to read a naked price chart.  Price action is simply the combination of all buying and selling as it is printed to a chart.  Most importantly, if you can learn to read a price chart, you can use price action trading strategies to trade stocks, bonds, futures, Forex and even options in any of these markets.  So, for the untrained trader, price action can be used to trade almost any trading strategy, and if fact, is the only sure thing that we know of that will eventually get you to profitability as a trader.

Trading Options With Price Action

Trading Options With Price Action

What people fail to realize is that prices are not just random, but rather there is reason why prices do what they do.  Once you understand and accept this fact, you can then get on the road to learning price action and how to read a price chart without all of the unnecessary clutter that comes with indicators and the other fancy trading ideas that simply do not work in the long run.  As prices print to a chart, it’s like tracks in the sand, and when you also combine the known biases that are always present in prices, then it becomes possible to not only understand why prices are doing what they are doing, but you can also learn to determine where prices are going next with a high level of accuracy.

Nothing is ever 100% with any strategy, but if you have the ability to read a price chart properly, which is all price action trading is really, then you also have the ability to put the odds on your side.  A good price action trader can scalp out of winning trades consistently on an 80% or better pace.  Even better, understanding prices will keep you on the winning side of the market the majority of the time, so if you are careful in how you approach your entry and exits, you can find a good trend and stay with it for longer.  This is why we suggest that anyone wanting to trade any type of market or any type of chart size should still concentrate on learning price action trading, or the ability to read a price chart.  Think about this for a moment if you have any trading experience:  When you entered your last trade, did you truly understand what prices were doing at that moment and did you have a solid understanding of where they were going next, or did you simply try to enter in the current direction because you were hoping prices would go further in that direction?

Instead of entering a trade on hope, why not learn to read a price chart and enter a trade knowing that there was a 70% or better opportunity that you would enter on the right side of the market, which means you entered knowing with a high level of confidence that prices would move in your favor giving you a profitable trade.  The real point of this article was not to convince you to learn price action though, as our point is in fact to make you aware that you can use your chart reading skills to be profitable on any time frame and in many more arenas than just day trading.  We already told you that price action works in stocks, bonds, futures and Forex and on any time frame, but guess what?  You can use your price action trading skills to trade options in any market that also offers options.  While we aren’t going to go into any extended explanations on how to trade options, just know and understand that you can take a small amount of cash and make a large amount of money in options with very limited risk.

While it’s also billed as being too risky for small retail traders, if you know how to sell options, you can combine that knowledge with the ability to read a price chart and open the door to one of the greatest money making opportunities that are available.  It’s a common fact that 90% of all options expire worthless, so this means that you have only a 10% chance of making money buying options, while anyone selling options is going to make money 90% of the time.  Think about a winning strategy that wins 90% of the time simply based on the way you make the trade and nothing more.  If you could combine this type of winning strategy with the ability to read a price chart, then you have the opportunity to improve your win percentage north of 90%.

We are not the first group to suggest using price action strategies to trade options either, and whether you buy or sell them, you can do both with much more accuracy if you can indeed read and understand a price chart, so price action trading is obviously one of the greatest tools available to help you in reaching profitability in any trading strategy.  We found some great information on option trading using price action strategies at  I thought I would share with you some of what they had to say at this site.  Below is a small excerpt from that website.

Binary option price action simply refers to the pattern displayed in terms of the asset’s price movements.  This is usually developed after observation over a period of time.  Proper analysis of price action requires some developed skills and art. As you observe the price action for the commodity of interest to you, it becomes possible to accurately predict how the price will move in the future. This means that price action is a necessary tool through which the trader can project the future price direction of the assets they wish to use.

The fact that price action is simply based on the observation of the price trends and patterns rather than on indicators means that the trader can enter in at the right time. Other tools require the binary options trader to make observation of several indicators which may at times hinder the trader from entering at precisely the right time.  This is a great disservice to the trader who requires to make use of the tools which provide a perfect platform for entering into the faster paced financial markets especially with binary options.  You can read the rest of the original article here.

As you can see, we are not alone in our beliefs about the importance of price action   Even if you are not interested in trading options, you can improve your overall trading by learning to read a price chart.  The thing we liked about the information from binary option trading is that they get it!  They understand that price action and the ability to read a price chart gives you an advantage over other traders.  If you don’t get anything else from this article, we hope that you will understand the importance of understanding prices and knowing the general laws or rules that prices tend to follow as they print to a chart.  If you choose to use price action to trade options, then do your homework on options and don’t just jump into it blindly.  Like anything trading related, if you don’t know what you are doing, it can be a risky endeavor.

Hopefully we have given you some great ideas and tips for some new and exciting trading strategies.  Understanding that price action is not just for day trading is important and this fact is not clarified enough in our opinion, therefore this article.  If and when you decide to learn price action trading and learn to read a price chart, we can certainly help you in that area.  You can find out more about price action trading here on our website by visiting