Price action trading is a process which relies on Japanese candlestick pattern analysis. Based on the common market behaviors and candlestick patterns, you will need to execute the trades. You can think of the Elliot wave theory for example. Studying from the recorded data on market conditions and common market behaviors, you can easily find a perfect trade setups. This way, you can trade less and still manage a decent profit potential by trading the market with decent lot. The only requirement is that you emphasize market analysis more than anything. It does not mean you have to lose the other aspects of trading in Forex. Instead of spending more time for the money management and trading plans, you will need to take time on market analysis. The trades will also not come randomly when you are price action trading. So, a little bit of patience is required to ensure proper quality of trading.
As a rookie in Forex, if you can ensure proper price action trading, you can manage profits. It also helps to survive in the most volatile marketplace in the world by not trading frequently.
Spend more time on proper market analysis
As we mentioned, price action trading emphasizes on the market analysis more than anything. To trade based on the common market behaviors, we need to spend time analyzing. Many traders have changed their life by using the demo trading account Forex. To be specific, analyzing the technical data based on price action signal increases your profit factor to a great extent.
Trading based on the common chart patterns needs more technical tools. There common chart patterns and indicators to help the traders understand. On the other hand, oscillators and trend lines also are useful. You cannot deny the necessity of trend zones and Fibonacci retracement. Besides the position sizing of the trades, you also need to ensure a proper stop-loss and a take-profit. For that, support and resistance zones are necessary.
So, you will need a quite significant amount of time to do a proper market analysis. Develop a proper trade setup so that, it does not bother you with price action trading. Also, be safe with the trading approaches. Thus, you can avoid big losses from the trades.
Use a decent and fixed money management plan
For a price action trading policy, you will need to have a proper trade setup. In it, risk management will be the first thing with the most importance. You will need to trade with minimal to almost no investments. If it is possible for you, it is easy to survive in Forex. Being a rookie trader, you can do nothing more than that to ensure the safety of your trading business. Follow a very decent risk management plans concerning your trading capital. Decide on a proper lot size which will be 1-2% of your account balance. With this idea, you can trade 50 to 100 times with the capital even after losing everything.
Using a decent investment policy can be improvised with the proper leverage. That does not mean, you need to use 1:100 leverage to the trades. Along with the big lot sizes, you will also need to think of the losses. If there is any poor position sizing of the trades, big leverages will affect the equity more than decent leverage. So, a novice trader needs to leverage the investment with 1:20 or less.
Trade less frequently to maintain quality
The price action trading policy also depends on the trading frequency. Without knowing about the trading methods, you cannot survive in Forex trading. Even for the short term trading, you will need to choose between scalping or day trading. But the real conflict is not with the trading method. You will need to trade less frequently with any chosen method. To ensure a proper market analysis and the safety of the trading money, avoid the overtrading concept. Instead of trading for big profits, try to ensure quality in one trading approach.