Four essential price action confirmation signals you must know
Thousands of trading strategies are available on the internet market place. However, if you dig deep you will realize all of them have some common traits. The complicated trading strategies are just an augmented form of a balanced trading method. Does this mean, you should rely on a complicated trading method? Being a human being, we can’t process tons of critical information in the real market. For this reason, it’s always better to choose a simple trading method. So, which one should we choose? Well, those who are completely new to this market can focus on the price action trading strategy. This is one of the most unique and powerful trading methods to make big profits from this market.
The price action trading requires the use of too many complicated candlestick patterns. But the elite UK traders always rely on some of the most powerful price action confirmation signals. Today, we are going to learn about four essential price action confirmation signals that can change your life.
The pin bar
The pin bar is usually a reversal pattern that if formed near the critical support or resistance level. The body of the pin bar is very small and the wick is at least three to 4 times bigger than the body. When you spot a pin bar at the critical resistance level, you should consider it as a bearish reversal sing. On the other hand, when you spot the pin bar near the critical support level you should consider it a bullish reversal sign. Based on the formation of the pin bar you can trade the market with a very tight stop. But when you start using the pin bar, try to find trades in favor of the major trend as it can significantly boost the profit factors at trading. Avoid trading the reversal as it increases the risk to a great extent. And when it comes to price action trading method, always trade with the best broker. Visit now to learn about the professional broker Saxo.
Bullish morning start pattern
The bullish morning star pattern is widely used in the CFD trading industry. The skilled traders execute long trades on the stable stock when they spot this pattern at the critical support level. Usually, the pattern is formed on the combination of three major candlesticks. The first candle is a bearish candle which is usually the part of the previous bearish trend. The second candle will be a doji or a bullish pin bar. The third candle is the confirmation candle which shows the strength of the buyers. When you execute long orders by using the bullish morning star pattern, set the stop loss just below the tail of the candle.
The engulfing pattern is a very popular price action confirmation signal that is even used by rookie traders at Saxo. Let’s say the first candle is bullish and the price is trading near the critical resistance zone. If the second candle manages to engulf the first candle, you have the bearish engulfing pattern. Similarly, in the case of a bullish engulfing pattern, the second candle will be bullish and it will engulf the first candle. When you use the engulfing pattern make sure you are not taking a high risk even though this pattern has a very high success rate.
Doji is usually formed when the buyers and sellers are having a tough time in the battle. It represents indecision in the market. Pro traders look for the reversal sing when they spot a doji at the critical support or resistance level. But if you want to make a profit by using the doji make sure you are using the higher time frame. Trading the market in the lower time frame always results in a big loss. Right after the doji, you need a strong bullish or bearish candle to execute the trade in the market. Make sure you are not taking a high risk by seeing the success rate of this candlestick.