A few reasons why price action is the preferred indicator for many forex traders
For a moment, throw out complicated analysis schemes and just look at the market. Just sit and watch the prices go up and down.
Enjoyable isn’t it?
Many traders love using price action as their number one indicator because it’s like watching a sporting event where the outcome is unknown but there is plenty of action along the way. There are ups and downs, and things can change dramatically from one moment to the next.
Here are a few more reasons why price action is still the indicator of choice for many traders.
Then and Now
Unlike the stock market, prices in forex repeat themselves. If a price was rejected in the past, it will likely be rejected in the future or the now.
Understanding historical prices and connecting them to now’s prices is therefore very important for traders. To do so, traders need to take a deep dive in studying prices to uncover the complexities behind them such as, behavioral patterns and decisions traders made that influenced the prices.
Easy to See
A simple, no frills price chart shows us how a particular asset has moved through the market.
While it’s simple in its presentation, the price action shows us so much without overwhelming our eyes and brains with information. Price delivered like this filters out the noise and just shows us the action.
Price in the Present
In previous articles, we laid out a number of different indicators. From stochastic indicators to MACD, the one thing all these other indicators had in common was that they were lagging.
All the information presented by these tools suffered from a delay that could cause traders who solely rely on them to miss the bigger picture of the market.
Price indicators solves this lag problem as it’s the only indicator that’s real time. It’s unfiltered, unprocessed, without delay. You see the price as it unfolds, giving you the most up to date tool in your analysis toolbox.
Works Across All Trading Platforms
Let’s say you come to forex after trading in another market. Rather than learn an entirely different and new way to read the market, price indicators are the same from market to market.
A stock trader who reads price indicators, speaks the same language as a forex trader who reads them as well.
This overlap is helpful if you’re looking to move in a new direction or simply want to expand your current trading career.
Technical traders who use price indicators have a huge leg on fundamental traders when it comes to speed.
While we’re not saying faster is always better, but technical traders just don’t have to worry about things other than the prices flashing across their screens.
Because it’s faster, it requires less research. For those traders who aren’t too keen on pouring over the literature and constantly looking to learn more and more, price indicators can be a less tiring indicator tool
This article is not meant to tell you that price indicators are better or worse than other indicators. It’s merely to point out that it remains a favorite tool for many technical traders. What you decide to use as your go to indicator will always come down to what you’re most comfortable with and what works best for your unique trading personality.