What is the best forex indicator? Guess! It's the price action. Technical analysis is a tool that many traders use to make educated guess about the future price action based on the past price action. All technical indicators that are used in technical analysis are based on price action. These indicators drive their signals from price action. This makes them lagging as the price action takes place first and the indicator gives the signal later based on the price action that took place in immediate past.
There are many traders who only trade price. This Price Action Trading Method is also called Trading Naked. Trading Naked means not using any indicator. As a trader, you need to understand the concept of trendlines and support and resistance. These concepts are central to trading the price action.
Trading naked means only using the charts and nothing else when you make a trading decisions. Forget about MACD, Stochastic, RSI, CCI, Bollinger Bands just focus on the price. This means knowing where the support and resistance is.
Support is the price zone where buyers think that the market is oversold and it is good to enter the market. When large number of buyers enter the market around the same price level, price in the market starts to rise. Prices rise till they reach a zone where sellers get jittery about the price having gone too high and the market having become overbought. So, they start selling in panic just in order to take profit.
When large number of sellers enter the market around a certain price level, this forces the price to fall and start decreasing. So, the price keep on moving back and forth between the support and resistance. The strategy is to enter into a market by going long near the support and exiting the market near the resistance by going short.
Sounds simple? Yes, but how to determine this is the support and this is the resistance? Many traders use indicators like the Stochastic to determine the overbought and oversold conditions in the market to confirm the support and resistance. Now, use only one indicator to determine the support and resistance. It can be stochastic, it can be MACD. Make your choice and then only depend on it by mastering that indicator fully.
Don't use more indicators. It will only make you more confused.
Support and resistance is the most wonderful concept in trading that has made many traders a fortune. You too can make a fortune by mastering this concept of support and resistance
Article Source: http://EzineArticles.com
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