Price action involves the change of a cryptocurrency’s price from time to time. These actions include increasing and decreasing prices. Price actions have been a major way for market traders to make investment decisions.
The interpretation of price actions leverages charts. To see the price actions clearly, candlesticks are the most common chart system used.
Price action data can also help get the technical indicators of a particular asset. The indicators include resistance, supports, breakout, candlesticks, and trends. Expert day traders often use price action as a source of information instead of secondary technical analyses.
Trading Using Price Actions
Price actions have high popularity in trading markets and especially for swing traders. Price action traders work with strategies like trendline trading, long wick candles, and inside bar after breakouts.
Trading with price actions carries benefits and drawbacks. When using price actions, the time needed for research is shorter. The investor has everything right on click.
Using price actions in decision-making allows the investor to test on simulators. Proper simulator testing can help investors get a better picture of trading. Finally, by using the price actions, you can leverage any available trading strategies.
Limitations of Price Actions
Price actions can be very impactful in determining flexible strategies. But, price actions also have limitations. Interpretation of price actions is subjective. Each trader can look into the market charts and come to their conclusions. One person may conclude that an uptrend will continue, while others have an opposite conclusion.
This limitation could be a disadvantage to a lot of investors who make decisions based on wrong analysis. Other downsides connected to price actions include;
- Traders must wait until prices reach a certain level to enter the market. If not, they end up with losses.
- Poor placement of stops.
- Irregular sizes of the candlesticks.