Uses of price action trading
1/ First of all, price action is about simplicity. In order to make a decision to enter the market, a trader does not need to crowd his/her price chart with tons of technical indicators, such as oscillators, Fibonacci retracements, a number of moving averages, pivot points etc. Such over-analysis does not do you any favor. Using such a complex approach of examining the chart eventually drains your energy, causes stress and opens the door to emotional trading
2/ In order to secure your trading, do whatever it takes to remove all the factors, which induce stress. So, clear your price chart from all technical indicators. All these indicators usually produce results, which lag behind the actual movement of price itself. Sometimes these indicators signal to go long just as prices are about to retrace to the downside. This could turn out to be a major drawback, especially at times, when the price demonstrates a formidable move (a sudden breakout, for instance). When this occurs, most indicators will usually not respond until a major part or the entire move ends.
3/ Basing your trading decisions on price action, allows you to trade in real time, in consonance with market’s movement. When relying on the help of candles (bars) alone, you are able to understand what exactly is happening in the market. Price action leads to clarity, while clarity boosts your confidence when entering into a position.
4/Second, signals produced by price action are quite easy to detect. In order to understand price action strategies you do not necessarily need to hold a Master degree in Economics or Finance. Access to price action is allowed to anyone willing to devote a certain amount of time studying its basic ideas.
For example, a very popular signal is the so called Pin Bar Reversal. A pin bar stands for a major reversal signal, which allows you to form expectation in which way prices are likely to move next. A pin bar has a long lower or long upper wick (shadow).
In case we spot a pin bar with a long upper shadow, this suggests that prices are not likely to move further to the upside, because of a strong resistance, that has been encountered. A move to the downside is more probable.
Source: Internet
