Those who are trading the financial asset by using the price action trading strategy often thinks that the indicators are useless. To be honest their statement is true to some extent. There are many traders in the world who are using the indicators in exchange traded funds to make a decent profit. But they don’t trade the market based on indicators reading only rather they consider them as helping tools in their trading. Even the professional price action traders also use indicators to enhance their trading performance in the market. Trading the financial assets can be extremely difficult if you don’t know how to trade the market properly. In order to make consistent profit in the forex market, you need to have a clear overview of the market dynamics. If you trade the market without having a clear concept about the market movement then you will end up by losing money in the forex market. Before you start your trading career with the real money make sure that you have a strong foundation in this industry. It’s true that the beginning part of the traders’ career is extremely painful but over the course of time, the new traders can easily achieve their success in the financial sectors provided with the proper trading guideline of exchange traded funds. In this article, we will discuss how we can enhance your price action trading strategy by using the indicators in the market.
Know the different types of indicators: There are many different types of indicators in the forex market. The most common two types of indicators are the leading indicators and the lagging indicators. So if you are professional price action trader and using the smaller time to trade the live market then you can use the leading indicators to filter out the false setups in the market. For instance, let’s say you are using the stochastic indicators and you have spotted a bullish pin bar in the 30-minute time frame. So most of the professional traders will go “long” with the formation of the bullish pin bars but the expert will be looking for an oversold stochastic in their chart. If they find the stochastic reading in the oversold region they will execute their buy orders in the market and if not, they will simply ignore the trade in the market.to be precise the indicators helps the price action traders to filter out the best trades in the market. But before you start using the indicators in real life trading make sure that you know how to use them properly.
Use of ADX indicators with price action trading strategy: ADX indicators are mostly used by the trend traders and it is often known as the Average Directional Movement indicators. There are two lines in the ADX indicators – the negative DI line and the positive DI line. When the negative DI line crosses the positive DI line, it means a bearish reversal is coming in the market. On the contrary, when the positive DI line crosses the negative DI line, it indicates a possible bullish move in the market. This tool is widely used by the expert during the execution of trade orders in the exchange traded funds. When the professional price action traders spot a bullish reversal signal in the key support level in the market they look for the bullish crossover in the ADX indicators prior to the execution of the trade in the market. In a case of bearish price action setup they look for bearish crossover in the ADX indicator. To be precise the indicators is helping the traders to filter out the best possible trades in the market. So if you are price action trader then you can use the ADX indicator while trading the possible trend reversal in the market.
Simple and exponential moving average: The most two widely used moving average in the financial sectors are the simple moving average and the exponential moving average. Moving average helps the traders to identify the dynamic support and resistance level in the market with the great level of accuracy. Professional price action traders use the dynamic support and resistance level of the moving average to take high-quality trades in the market. Trading with the moving average will be extremely difficult at the very beginning but if you have a clear understanding of the price action trading strategy then you will eventually find out that the combination approach of moving average and price action trading strategy allows the traders to execute high-quality trades in the market. The use of moving average varies from traders to traders but the most used moving average are the 100 and 200-period moving average. This two period gives the best dynamic support and resistance level to the price action traders. The expert also uses the confluence of manual support and resistance zone in the market to trade the live assets. But if you use the exponential moving average then you can use the 21 and 8-period moving average in the market. But always make sure that you trade the dynamic support and resistance level of the market by using the price action confirmation signal.
Summary: Indicators can be extremely useful to the price action traders provided that they use it correctly. Most of the professional price action traders use one or two indicators in their trading chart to filter out the best possible trades in the market. And in order to achieve better precision in trading, you can try altering the values of indicators according to your needs.