If everyone use same strategy, there will no trading business. Inovation is the key for success in any industries.
I see, many traders are using Price Action trading strategy but they have the different trading history based on their recent trading performances! So, the same strategy doesn’t mean same result.
'Price Action Trading' is a very broad concept. It can mean anything from trading Japanese Candle Patterns, Historical Support & Resistance, Fibonacci Retracement/Extentions, Elliot Wave and countless chart patterns like Double Tops, Head & Shoulders, etc. A Trader can use any one of them or a combination of a few of them, and it is still technically called Price Action Trading.
Price Action literally means analyzing the movement or behavior of the price of an instruments over a particular time frame. I personally think all new traders should learn the basics of Price Action trading and then combine it it with fundamental analysis and perhaps 1 or 2 good indicators like the RSI or 2 Moving averages to formulate his/her on strategy. And I'm only talking manual trading here.
Here's an example of one of the ways I use RSI indicator to look for Buy/Sell setups. Refer the attached image of a GBPUSD Daily chart (showing price movement from May 2017 to Dec 2017). I added a number of arrows and text to illustrate. The following can be applied on any time-frame, but it works better of higher time-frames like the 1-Hour and up.
1) Look for divergence on the RSI. At number one there was Bullish Divergence below the 30 level (must occur when RSI was below 30 or above 70) This indicates that the downward momentum is weak and a shift to upward momentum is expected. Basically the possibility of a trend reversal from the downtrend to an uptrend is very strong. Important! - don't yet act on this. Wait for confirmation of the reversal.
2) Look for a break of the previous High/Low. At number two the market reversed and broke the previous Swing-High. This in itself is an indicator that a possible reversal has begun. Again DO NOT act on this yet.
3) Now this is where the Price Action magic happens. At number 3 the market pulled back and re-tested the break of the previous High. As price action traders this is the point we sit up and take notice. We look to see how the market reacts around this level. If the Resistance/Support level of number 2 holds then we want to Buy, else if it breaks, and then breaks the RSI Divergence level, the trade setup is invalid.
4) At number 4, at the close of first or second candle after the retest, we place a buy order.
5) Number 5 illustrates the placement of the stop loss level, below the RSI Divergence level
6) Number 6 illustrates how we place our take-profit target level. I typically look for previous support/resistance levels, but they have to give me at least a 1:2 or better risk reward ratio.
The point of all this is to illustrate that Price Action Trading cannot be defined in a single strategy. Sometimes I use RSI Divergence, sometimes I see a Head & Shoulders or Double Top/Bottom pattern. Sometimes I simply look at how markets react to economic data around key sup/res levels. That's what makes it exciting and interesting for me - figuring out what the emotional response of the crowd is to key levels, and then detecting where the smart money is going. I'm not always right of course, and losses is something you HAVE to accept as part of your trading career, but man it feels good when you execute a good trade setup perfectly!
The key is to use your God-given intelligence and actually LOOK what the market (price) is doing around key levels. Always remember that Price Action is a direct reflection of the collective Greed/Fear of all the people that participate in a market. So what you actually want to do is figure out what the smart money (market movers) is doing and then follow them.
Anyway guys, good luck trading out there, and may 2018 be a very profitable year!