I constantly receive letters from my readers. I am very grateful for them because they inspire me to write guidebooks, exactly like this one, which answers the questions you asked. Today, there are two subjects. How to trade using only price action and how to trade using only candlesticks.
I was genuinely fascinated by questions about the above because both methods do not require extra help from the indicators. The only thing you need to do is to observe the chart and price movements. Let’s look into it.
2 different trading approaches to use at Olymp Trade
Trading based on candlesticks
It does not seem to be very complicated. Trading based on candlesticks is technically nothing more than observing the colours of the candles. If you notice green candles it is a sign of the bulls’ domination and thus, you enter a long trade. If the colour is orange, it would mean the opposite. The bears dominate the market and you enter a short position. But this is not enough.
The most important thing is to know the exact point to enter the position that will bring you the biggest profit. The general rule is to open the position when one candle closes and another opens. Do not enter when the candle is half-developed. Moreover, watch for the solid candles, and not the special ones. The latter appears in the periods of high volatility and therefore it is quite risky to trade them. The price is much likely to change before the expiration of your trade.
You have the possibility to trade digital options with Olymp Trade. Choose the asset and set your chart for 5-minute interval candles. This means that one candle is fully developed after 5 minutes and afterwards, the next candle begins to form.
You should always wait for a full candle to develop before entering the trade. Do not open a position in the middle of one candle. Move in exactly when one is finished and the next is about to begin.
You have to analyse the candles and when you know what move to take, be ready to hit the Up or Down button at the precise moment of closing the candle.
Consider an example below. It shows the winning options trade for a duration of 1 minute. As you can see in the picture it was entered at the right moment, that is when the candle closed and the next started to form.
As I said, you have to be ready to click Up or Down. Otherwise, you can easily miss the opportunity to make a good profit. In the picture below you can see that the trade was entered with a 2-second delay. Luckily it was profitable but you can clearly see that in those 2 seconds price made a huge part of upward movement and sometimes it is enough to ruin a good trading signal.
When you use candlesticks in your trading, there is no need to be troubled by the price. The thing that you focus on is the colour of the candles. You should look for the few candles before potential entry point. This strategy is especially good with a clear trend. Like for example, when you see a few green candles following one another, you can predict more are on their way.
Trading based on price action
Below you will see a chart where the price is consistently rising. Based on the trend and strong bullish candles, it has been possible to open several profitable trades for price increases. Even the most trending market must have consolidation and correction moves. The start of a correction move may herald the current pinbar. After it occurs in a 5-minute chart, you can try to open an option for price decreases for 15 minutes.
In a very dynamic trend, this type of upstream trading can be very risky. Then it is worth supporting the emerging candlestick pattern with something extra, such as the existing level of support or resistance. This time it was possible to earn money. See the chart below.
As you know, it often happens that a broken resistance level becomes a future support level and vice versa. In the picture below, we have an example of such. You can use the occurrence of a candlestick pattern as a confirmation of a price return. In this case, the confirmation is a very strong bullish candle. Immediately after such a signal, a buy position can be opened.
When you trade using price action, you must proceed quickly. You have to analyse the price for a certain period before entering the trade. But once you identify a solid point of entry, making the winning trades is no problem at all.
Do not rely on your gut
Both, trading based on candlesticks and price action, demand certain conditions to occur. The one very important is patience. You will need to spend some time analysing the charts and waiting for the best moment to enter the position.
Do not enter the trade based only on your gut. These are emotions that are talking, and they are not the best advisors in the financial world. You cannot count that luck will bring you a fortune.
No matter if you are trading using candlesticks or price action, remember always to follow some rules. Even if those strategies look easy to apply at the beginning, they demand a certain portion of focus. If you use them incorrectly, you will probably end up with a loss.
Now that you know how to apply both methods in trading, go on to the Olymp Trade demo account. Practise candlesticks trading, practise price action trading and tell us how you find it. There is the comments section below.
Best of luck!
We are sorry that this post was not useful for you!
Let us improve this post!
Tell us how we can improve this post?
Download this article as PDF. (English)Enter your Email Address