July 18, 2017, 6:10:30 AM EST
by Newsmovesmarketsforex Staff Writer
What is FX price action?
Forex traders use a variety of techniques to estimate market trends. The trading decisions they make are heavily influenced by real-time price movements.
The Forex price action is a popular technique used by traders to assess the Forex market. Learning about its dynamics is necessary to correctly predict price movements in currency pairs.
Market trends can change suddenly and the prevailing market sentiments determine the Dynamic price action of each currency pair. The NZD/USD Chart given below shows that on July 13, 2017 the NZD/USD spiked to a level of 0.7365 before falling back to a temporary support level of 0.7303. The currency pair continued to trade in a consolidation range for 24 hours and then broke through the 0.7307 level to a low of 0.7295 before finally rising back to the 0.73635 resistance level.
This shows how the Dynamic Price Action for a certain currency pair changes according to a certain process and then retests the support levels and resistance ranges within a single day.
Why is it important to understand how the FX price action works?
Forex trading has no centralized exchange points. The Forex Market is operated through various electronic communication networks, institutions, brokers, private bank investors, hedge funds, central banks, commercial companies, and investment management firms.
As stated in a previous published article dated June 21, 2017 by News Moves Markets Forex… A Quick Guide To ‘Support And Resistance’ For Forex Traders: Learn More Here!, understanding how FX price action works is the key to figuring out the behavior of the Forex Market itself.
The Forex market includes all currencies of the world and trades non-stop for six days a week with a daily trading volume of about 4 trillion dollars. In order to be successful, Forex traders should look beyond the technical analysis of the Forex Market and try to understand trends and patters that determine its movements.
What affects the dynamics of the FX price action?
For each individual currency pair, the FX price action has its dynamic price movements. The four major US dollar based currency pairs are EUR/USD, GBP/USD, CHF/USD, and JPY/USD. The movements of these currency pairs directly correlate with the changes in FX price action within the Forex spot markets.
The price of the US dollar is affected by the state of the American economy as gauged by industry-based economic indicators, US trade data, and prevailing political conditions.
Experienced FX traders can use their knowledge of market fundamentals and current in the market to predict price movements of currency pairs. This would give them an edge over their competitors and enable them to implement an adequate risk management structure, evaluate important trade setups, analyze entry and exit points within the market, and execute beneficial trade deals.
The spot price movements of the currency pairs are directly impacted by major global events, such as geopolitical tensions or natural disasters. A market spike can occur when there is a short-lived, but large, upward or downward movement in the market.
In the absence of positive or negative indicators, the market can enter a consolidation phase in which trading is range bound and it stays at a certain support level. Price breakouts can take place after this when the market crosses a particular threshold and moves freely into a continuation process.
An experienced FX trader would take advantage of this knowledge of the dynamics of FX price action to gain maximum benefit from the FX Market.
Note: The Price Action takes on different shapes depending on what the market is doing at the particular time or scenario.
How to become a proficient trader?
The most vital aspect of any price action strategy is identifying the type of Market you are trading as well as the price cycle. One must be extremely diligent and patient to identify the correct Market bias before jumping in with both feet and executing trades.
Traders must confirm what harmonic pattern or trend that the market is giving them before committing to executing live trades. Forex traders should be extremely aware that investing or trading in the foreign exchange markets encompasses a great deal of risk and may not be suitable for everyone. Prior to investing money in the Forex market you should access or consider your investment objectives, level of experience and risk appetite. One should only use risk capital, traders should never invest money that you cannot afford to lose.
NewsMovesMarketsForex helps novice Forex traders learn how to be efficient traders. Our Forex Learning Center library is continuously updated with the latest educational information concerning FX Markets so that visitors can use it to add to their knowledge.
Forex market trading is a complicated process. NewsMovesMarketsForex endeavors to guide you through every step of it and provide you with the information needed to enhance your trading skills. So stay locked in to News Moves Markets Forex for the latest information about Forex markets.