| Updated: September 11, 2025Why should you trade based on price action?
This lesson covers the following
- Main reasons to trade using price action
- Advantages of price action
Having discussed some general features of price action, it is time to highlight the advantages that trading in this way truly offers.
First of all, price action is about simplicity. To decide whether to enter the market, a trader does not need to crowd their price chart with a host of technical indicators, such as oscillators, Fibonacci retracements, a number of moving averages, pivot points, etc. Such over-analysis does you no favours. Using such a complex approach to examining the chart eventually drains your energy, causes stress and opens the door to emotional trading (as we already said in our previous guide, giving in to emotion is the surest way to financial ruin).
In order to safeguard your trading, do whatever it takes to remove all factors that induce stress. So, clear your price chart of all technical indicators. All these indicators usually produce results that lag behind the actual movement of price itself. Sometimes these indicators signal you to go long just as prices are about to retrace downwards. This could turn out to be a major drawback, especially at times when the price demonstrates a formidable move (a sudden breakout, for instance). When this occurs, most indicators will usually not respond until a major part, or even the entire move, ends.
Basing your trading decisions on price action allows you to trade in real time, in harmony with the market’s movement. When relying on the help of candles (bars) alone, you are able to understand exactly what is happening in the market. Price action leads to clarity, while clarity boosts your confidence when entering a position.
Second, signals produced by price action are quite easy to detect. To understand price action strategies you do not necessarily need to hold a master’s degree in economics or finance. Price action is accessible to anyone who is willing to devote some time to studying its basic ideas.
For example, a very popular signal is the so-called pin bar reversal. A pin bar represents a major reversal signal, which allows you to form an expectation about the direction in which prices are likely to move next. A pin bar has either a long lower or a long upper wick (shadow).
If we spot a pin bar with a long upper shadow, it suggests that prices are unlikely to move further upwards because strong resistance has been encountered. A move to the downside is more probable.
If we spot a pin bar with a long lower shadow, it suggests that prices are unlikely to move further downwards because strong support is present. A move to the upside is more probable. Combining these bullish and bearish price rejections with major resistance and support lines on the price chart gives you a simple trading strategy.
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Third, time frames on which you trade are of particular significance. Some price action traders prefer to use daily or weekly time frames, considering them more reliable. This is because one daily bar contains a considerably greater amount of data than one 5-minute bar. The more data a bar contains, the more reliable the signals it produces. These signals have a greater potential to result in a successful trade.
Using higher time frames when trading gives you more time. There is no need to spend hours per day in search of an intraday signal. Trading on a daily price chart even allows you to focus on your full-time job. We can say that price action analysis rewards a disciplined trader who does not overtrade.
Fourth, consistent gains in the currency market are obtained through a flexible trading method. Whether in a trading range or a strong trend, the Forex market is extremely dynamic. To take advantage of the market’s movement, you should rely solely on price action strategies. There is no lag: either a candle setup is present or it is not.
To sum up, price action gives you a great opportunity to be emotion-free and flexible in your decisions and, last but not least, to make a living trading the global markets.