Price Action trading is one of the easiest and most profitable type of trading
Newbie traders are attracted to technical indicators - hoping to find out the best short-term opportunities in the market. However, they often do not realize that the vast majority of these tools are based on simple price action.
In other words, why should you deploy dozens of indicators when you can directly go to the root of market movements - price?
Want to jump into price action trading in Australia? We'll explain what price action trading is and how it works. We also explain which charts to use and how you can find the right online broker to start your price action trading journey today. We'll also cover price action trading strategies.
How to Start Price Action Trading Australia in 3 Quick Steps:
Step 1: Open a price action trading account
Step 2: Learn how the price action trading market works
Step 3: Learn price action trading tips and strategies
Step 4: Place a trading order
Want to dive into Price Action Trading?
What is Price Action Trading Australia?
Put simply, 'price action' represents the up and down movement of an asset's price in the market.
When using a price action trading method, you will be looking at the price movements of the security to arrive at your trading decision. This strategy is mostly preferred by short-term traders, particularly in highly volatile markets.
In many ways, price action trading is a type of technical analysis. However, the main difference is that this strategy focuses on the relationship of an asset's current price to its previous value - rather than the 'second-hand' values derived from its price history.
In addition, this trading method almost entirely disregards fundamental analysis. Instead, the only key metric here is the price movement of the security in question.
By learning to read price action - you will be able to better time your market entries and improve your overall trading performance.
That said, price action can be interpreted differently by traders. As such, inferences from market movements can be subjective to each individual, depending on their own interpretations.
- Let's say that an asset has been lingering at a price of $450 for a while and then makes a sudden upward movement to cross $480.
- For one trader, this might mean that a bullish trend is about to follow.
- Whereas another trader might believe that a price reversal is about to happen.
As you can tell, the same price action can have two entirely different conclusions based on the mentality of the trader. As such, this trading system allows you to easily develop a personal strategy that is not overrun by other market players.
That said, the drawback is that you can also be easily influenced by emotions - unless you adhere to strict risk management strategies.
Which Assets are Best for Price Action Trading Australia?
Price action can be observed for every asset traded in the financial markets. As such, you can use this strategy to speculate on a wide spectrum of securities - such as equities, commodities, forex, cryptocurrencies, as well as derivative financial instruments.
However, traders prefer to apply this trading strategy in highly volatile and fast-paced markets.
As such, price action trading systems are particularly suited for forex and stock markets. These assets go through significant price fluctuations throughout a single trading day.
In addition, you can also employ a price action strategy to speculate around market events and news. A typical example of this is the commodity market, such as oil - which is often influenced by economic announcements.
Similarly, the price action trading method is also practical for financial instruments such as options and futures. That said, it is important to know that these markets might not offer you high liquidity - and therefore, it might be difficult for you to open and exit positions easily.
Assets for Price Action Trading
You can trade most assets using the price action trading approach. Below some of the most popular asset class include:
Best Strategies for Price Action Trading Australia
Most price action traders use a combination of strategies to identify the best trading opportunities in the market. The specific tools you employ will depend on your goals, - such as the time frame of each trade and the risk-reward ratio.
For instance, it is common for price action traders in Australia to use different setups for a single trading day. This way, they can adopt strategies to reflect current market conditions, and thereby, have a better chance at making a profit.
Although price action trading might exclude the use of technical indicators, it relies heavily on candlestick charts. These tools are one of the easiest and effective ways for you to read price movements and gain insight into the future direction of an asset.
Candlestick Charts for Price Action Trading Australia
A candlestick chart is a type of financial chart that shows the buying and selling activity of an asset within a specific time frame - as opposed to only indicating the opening and closing prices.
As you can imagine, a candlestick chart is made of several individual candlesticks - with each representing a specific timeframe. So if you are looking at a 5-minute chart, then each fully-formed candle represents a period of five minutes worth of price action.
Here is how you can read a candlestick chart:
- If the body of the candlestick is filled in green colour - it indicates that price action is following a bullish trend.
- On the contrary, if the candlestick is red - this translates to a bearish trend.
- In addition, the length of the wick of the candlestick can also denote whether the opening price is higher or lower than the closing price.
Price action traders look for different combinations of candlestick patterns to spot the best trading opportunities.
Here are three of the most commonly used candlestick patterns used by price action traders in Australia.
Three Line Strike
This candlestick pattern is used to predict a reversal in the price movement of an asset.
- A bullish three line strike consists of four candlesticks
- The first three candles are bullish, and the last one is bearish
- This will close below the lowest price level of the pattern.
Typically, when a reversal candlestick appears - you also want it to be accompanied by high trading volume. This is a further indication that the trend is being followed by traders taking long positions on the chosen asset.
On the other hand, a bearish three line strike will have the same pattern in reverse. That is - you are looking for three bearish candles, followed by a bullish candlestick that implies a price reversal.
For a price action trader, the reversal of these prices suggests a good entry point to open a position in the market.
Another commonly used technical strategy to spot trend reversal is the evening star pattern. This signifies that the momentum of the recent trend is slowing, and a bearish market is coming up.
The evening star pattern is made up of:
- A long bullish candle that sets off the pattern.
- A short bullish/bearish candle in the middle.
- And a long bearish candle that finishes close to the body of the first candle.
If you want to identify a bullish trend, you can use the morning star pattern - which follows this concept but in reverse.
Bull Flag Breakout
As the name suggests, a bull flag pattern resembles a flag on the respective pricing chart. This occurs when a security is showing a strong upward trend.
The pole of the flag suggests that there is a vertical rise in the price aided by high volume and the flag indicates the period of consolidation. This could be either a horizontal rectangle or at a downward angle from the current trend.
The pattern breaks with when prices are going up again - signalled by another strong bullish candle.
It is not uncommon for price action traders in Australia to open a new position before the pattern breaks - hoping to catch the upward trend. However, it is not guaranteed that an increase in price will happen.
Therefore, it is best to wait for the breakout to start, supported by high trading volume before you take a bullish position in the market.
What are the Benefits of Price Action Trading Australia?
Price action trading can be deemed simple in many ways. That is to say, when compared to advanced technical indicators, you have to keep track of only one metric - which is the price.
It is basically the skill of interpreting the raw price movements of an asset. It might take you a considerable amount of time to learn how to read and understand the different charts that you have access to.
However, there are a number of upsides to investing your time studying price action - such as:
As we mentioned earlier, the price action trading system is very subjective and hence can be tailored to fit your individual preferences. You can use a variety of charts based on which security you are trading or what the market conditions are at the time of the trade.
Meaning, regardless of how the market is behaving, you will be able to come up with a strategy that allows you to find trading opportunities. Furthermore, if you are not confident about one particular setup, you are always free to move on to an alternative position.
Put differently, you are not restricted to any specific setup or approach. Ultimately, price action trading Australia is open for interpretation - giving you a lot of flexibility to devise your own trading strategy.
â Real-Time Price Data
The majority of trading indicators are based on the price action of the asset. As these tools are deriving data from the price movement, it is likely that they lag behind the market by at least a few minutes.
However, when deploying a price action trading strategy - you are going directly to the source. This ensures that you get access to real-time market data without any further delays.
â Only One Variable
Most importantly, price action trading eliminates the clutter from your charts. You need to track only a single variable, that is - the price movement.
The general idea of price action is to identify recurring patterns in the market that have already proven themselves to produce profitable outcomes. Therefore, you can rely on the same plotting models to predict future price movements as it appears in real-time.
Once you learn this skill, it will become easier for you to anticipate the next move of the market with better accuracy.
Risks of Price Action Trading Australia
There are also some potential risks that you need to consider when adopting a price action trading strategy - such as:
â Highly Subjective
When compared to other trading strategies, the biggest disadvantage of price action trading is that the inferences are entirely dependent on each trader.
As we demonstrated earlier, the same price action can have different outcomes. Where one trader sees an approaching bullish market, others might consider it as an impending price reversal.
As traders are free to arrive at their own choices - the decision-making process can also be influenced by emotions. This makes risk management in price action trading Australia more challenging.
â Steep Learning Curve
In order to devise a price action trading strategy, you need to be able to read and analyze charts effectively. This means - you will first have to build a solid foundation and have a focused mindset before applying this strategy.
Taking this into account, it is always best for price action traders in Australia to place stop-loss orders on all positions.
This can help you keep risks in check, as well as eliminate the need for you to manually exit your position if the market goes against you.
â Difficult to Automate
Another main disadvantage of price action trading is that it does not always work with automation tools. The majority of bots available today take their data from technical indicators and not directly from price action.
As such, if you employ an automation tool, you will have to clearly define your parameters manually - which is not an easy undertaking for a beginner trader.
If you are leaning towards such an approach, you will have to carefully consider your options before choosing a price action trading Australia strategy.
Price Action Trading Australia Tips
With any trading strategy, it is important that you educate yourself before taking the plunge. When it comes to price action trading- this means that you have to gain a thorough understanding of charts and patterns.
In this section, we will suggest some of the best ways that you can develop the required skills to read pricing charts.
Bear in mind that this process will take you some time to master - albeit, what you learn can be extremely valuable for your long-term trading journey.
Tip 1: Find Educational Materials on Price Action Trading
Although price action trading focuses primarily on price movements, you can still gain foundational knowledge by learning about the ins and outs of the market. As you know, it is often a good idea to turn to experts when it comes to trading.
There are several books written by experienced professionals that can offer you valuable insight into this strategy. For instance, you can take a look at the Trading Price Action Series or Steven Nison's Japanese Candlestick Charting Techniques.
Alongside books, you can also find extensive articles and guides on price action trading Australia - on websites such as ours.
Tip 2: Take a Price Action Trading Australia Course
If you prefer a rather practical approach through video tutorials, you can also consider MOOCs (Massive Open Online Course) offered on learning platforms. You can find courses that can be tailored to your requirements, such as your current trading level, your chosen asset, the specific aspect you are trying to improve, and more.
For instance, the Price Action Trading MasterClass On Skillshare will give you a comprehensive idea of this trading strategy. If you want to focus only on your chart-reading skills, you can opt for the Candlestick Patterns to Master Forex Trading Price Action on Udemy instead.
In addition, there are also several exclusive platforms dedicated to trading education. You can sign up for boot camps or flexible programs that fit your criteria. These courses can be an excellent way for you to get familiar with the ins and outs of price action trading Australia.
Tip 3: Try Price Action Trading Australia Using Demo Accounts
It is common for professional price action traders to backtest their individual trading strategies on demo accounts before they try them in the live markets.
The best online brokers give you access to trial accounts that are funded with paper money. For beginners, this gives you the opportunity to practice your skills before trading with real capital.
Additionally, you can also use a demo account to get used to the different functionalities of the respective trading platform you are planning to use. Once you feel ready to start trading in live market conditions - you can typically deposit funds with a debit/credit card or bank wire.
Tip 4: Use a Copy Trading Feature
For those that lack the time to invest in research, the best alternative is to look for brokers that allow passive trading. For instance, the ASIC-regulated online broker eToro has introduced the Copy Trading feature on its platform.
This gives you the option to invest in an experienced price action trader and execute the same trades in your portfolio.
For instance, if a professional trader places a buy order on AUD/USD, the same trade will be carried out in your account as well. The only difference is, the stake will be proportional to the funds that you invested into the trader.
However, you will not lose control over your portfolio in any way when using the Copy Trading tool. On the contrary, you will be able to define individual parameters and will always have the option to exit an open position at any given time.
From another perspective, you can use the Copy Trading feature as an opportunity to draw insights from the trades of the professional investors and consider this as another learning experience.
How to Find the Best Online Broker for Price Action Trading Australia
Choosing your online broker is equally important as picking your trading strategy. You need the right set of features that matches your trading goals.
Today, you have hundreds of trading platforms to choose from - all of which can be accessed from the comfort of your home. However, this also makes the selection process daunting - especially if you are new to the trading scene.
For this reason, it is crucial that you have a solid idea of your criteria for finding the right broker for your price action trading endeavours in Australia.
The online trading space, in spite of its popularity, is dominated by rogue brokers. If not careful, you will be entrusting your trading capital to platforms that do not serve your best interests.
In Australia, online trading platforms are regulated by ASIC. It is highly recommended that you find a broker that is licensed by this authoritative body - so that you can carry on with your price action trading endeavours with peace of mind.
For instance, choosing an online broker such as eToro ensures that your trades will be regulated by not one but by three financial bodies - including ASIC, FCA, and CySEC.
It goes without saying that if a broker is not licensed, then it is best to take your business elsewhere.
As we discussed earlier, you can apply a price action system on virtually any tradable asset. However, not every online broker can give you access to all the financial instruments available in the market.
Therefore, before you proceed with a broker, it is suggested that you have an idea of which securities you are interested in. This way, you can look for online platforms that offer support for your chosen assets.
If in confusion, you can also opt for an online broker that gives you access to almost every asset there is.
Top brokerage platform eToro allows you to trade thousands of assets - giving you the option to switch between markets as you wish. This includes everything from stocks, cryptocurrencies, and ETFs to hard metals, energies, and forex.
Trading CFDs vs. Taking Ownership
Price action is highly suited for short-term strategies - such as day trading and swing trading. However, in such approaches, traders prefer financial derivatives as opposed to taking ownership of the respective asset.
To explain further - derivatives are instruments that track the value of an asset in real-time. For example, if you are trading gold CFDs - you will own the metal in its tangible form. Instead, you will only be trading a CFD that reflects the prices of the commodity.
This allows you to place multiple trades in a single day without having to concern yourself with ownership, storage, or security. In other words, you can profit from both upward and downward price movements with ease.
Moreover, CFDs also give the option to apply leverage on your trades. Therefore, it will be best to check whether your preferred broker supports CFD trading for your chosen assets before signing up.
Price action trading Australia has the benefit of being compatible with almost any kind of trading software. This is primarily because you do not need a wide range of technical analysis tools to apply this strategy. Instead, simple charts can get you all the data you are looking for.
This gives you the liberty to pick any trading platform of your choosing. The only thing is to make sure that it integrates with your chosen online broker. For instance, eToro comes equipped with its own native trading platform - allowing you to place trades directly through its website.
Alternatively, some brokers allow you to use third-party platforms such as MetaTrader 4 or cTrader. If you prefer to trade on the go or have quick access to your account - it is best to look for brokers that offer a fully functional mobile app.
Brokerage Fees for Price Action Trading Australia
Regardless of which trading strategy you choose, the trading fees charged by your broker can define how much profit you get to keep for yourself.
After all, an online broker is ultimately a business, and you will have to pay certain fees for its services. As you can imagine, these charges vary widely from one platform to another.
This is why you need to be extremely careful in choosing an online broker that offers the best value for your money.
Here is a list of common fees that you are likely to come across at price action trading platforms in Australia.
This type of trading fee is commonly associated with traditional assets such as equities. A majority of traders call it a share-dealing charge, calculated as a fixed rate against all your trades.
- Suppose that you decide to place a buy order on Facebook stocks based on your price action Australia strategy.
- The share dealing fees charged by your broker are $3 per trade.
- Meaning no matter what your stake is - you will have to pay $3 when you open your position.
- You will be liable to pay $3 again when you close your position.
As you can see, these charges can quickly add up unless you choose an online broker such as eToro - a platform that charges you zero dealing fees.
While dealing fees are calculated as flat amounts, commissions are charged on a percentage basis.
- Let's suppose that your online broker charges you a commission of 0.5% on all assets.
- You want to set a buy order worth $1,000 on the forex pair AUD/USD.
- Opening this position will cost you a commission of $5 (0.5% of $1,000).
- In a few hours, the value of your stake increases to $1,200.
- When you cash out - yet again, you will have to pay a commission of $6 (0.5% of $1,200).
Much similar to dealing fees, you are liable to pay a commission at both ends of the trade. Once again, eToro allows you to trade any supported asset at a zero commission.
The spread is another type of trading fee that you almost always have to deal with. It is the difference between the buy and sell price of an asset.
Put simply, if there is a wider gap between the bid and ask price - it means that you will have to pay a higher spread. As such, if you want to keep most of your profits to yourself, you need to find a broker that offers tight spreads.
For instance, if the spread at your chosen broker is 0.50% - it means that you will be opening your position at 0.50% in the red. In other words, you will have to gain at least 0.50% just to make it to the break-even point on this trade.
Any earnings you make after this 0.50% price mark can be accounted as your profit.
Deposits and Withdrawals
Apart from direct trading fees, you also have to concern yourself with any admin fees charged by your online broker. This comes in all shapes and sizes, ranging from transactional costs to inactivity fees.
It will be wise for you to take note of any additional fees so you will not be caught off guard once you start using the broker's services.
In addition, you also have to check how you can deposit and withdraw funds at the platform. The best online brokers - such as eToro, will give you an assortment of payment methods to pick from.
This includes bank transfers, debit/credit cards, and integrations with e-wallets such as PayPal.
Tools for Beginners
By now, you are well aware of the fact that price action trading Australia requires you to have a firm grasp on several analysis tools and charts. If you are new to this strategy, it will be better if your chosen broker can offer you helpful resources.
Here is a list of features offered by beginner-friendly online brokers.
As we mentioned above, one of the best ways to research price action trading Australia is to study from guides and video tutorials.
On platforms such as eToro, you can find an entire department dedicated to this purpose. This includes extensive materials on how to use the site, guides on different strategies, and tips you can employ with trading.
In addition, eToro also has a Trading School that comes with access to demo accounts. Furthermore, the broker will also send you regular market reviews and financial news so you can keep yourself up-to-date.
Automated trading gives you the opportunity to capitalize on the financial markets without having to invest time in research. Instead, all you need is to find the right automation tool that can passively trade on your behalf.
One such feature is the functionality of Copy Trading that we discussed in the earlier sections of this guide. This feature on eToro allows you to benefit from the expertise of a professional trader by investing in them.
Another notable feature is CopyPortfolios, wherein - you can invest in a specific strategy. eToro gives you dozens of trading systems to choose from, and your investments will be carried out and managed by the platform automatically. You only need to fund your account and set any preferences you have.
As you can see, these passive earning tools can be highly beneficial if you are not confident about your price action trading skills.
Tools for Experienced Traders
The priorities of trading tools for seasoned trading professionals can be entirely different from what we discussed above.
For instance, as a price action trader - you will need access to charts to aid your decision-making process. Similarly, depending on your trading strategy, you might also need to work with technical indicators such as the MACD, Stochastic Oscillator, and more.
Furthermore, many professional traders also have a trading setup they prefer - meaning it will be ideal to look for brokers that allow you to create your own watchlists or customizable screens.
Lastly, there is also an increasing demand for automation tools such as trading bots that will eliminate the need for you to watch over the market all the time.
Regardless of whether you are a beginner or a professional trader, the chances are - you will need these tools at some point in your trading journey. As such, it will be best to tick off these boxes before committing yourself to a new online broker.
Read Also: Top 7 Forex Trading Signal Services
When you are using the services of an online broker, you are essentially entrusting them with the safety of your funds. As such, it only makes sense that you have quick access to customer care whenever you need it.
Today, the best brokers have a live chat facility, offering you real-time support through its website. Alternatively, you can also contact the broker through email, community forums, and telephone.
How to Get Started With Price Action Trading Australia Today
We have now come to the last section of our Price Action Trading Australia Guide. All that is left now is for you to create your online account with your chosen broker to start placing trades.
Take a look at the different steps you have to follow to engage in price action trading Australia from the comfort of your home.
Step 1: Set up Your Price Action Trading Account
As with any other online business, you are required to open an account with the brokerage platform. On eToro, you can do this by providing your personal information - such as your full name, contact details, and date of birth.
Being a regulated broker, eToro also has to follow KYC rules. Meaning, you will also have to submit a valid identity card and proof of your residence to complete the procedure. The entire process is automated, and your account will be ready to use within minutes.
Step 2: Add Money to Your Trading Account
The next step is to ensure that you have sufficient trading capital in your brokerage account. You can add funds using a debit/credit card, direct bank transfer, or an e-wallet.
Step 3: Start Trading
At this point, you might have already narrowed down which securities you want to trade. You can find the respective trading page by simply searching for the asset on eToro.
The platform also comes integrated with built-in charting software. This will give you access to candlestick patterns and the price action of your chosen security.
When you are settled with your decision, click on the 'Trade' button to create your orders.
Make sure that you have entered the stake amount and take-profit/stop-loss orders before you press 'Open Trade.'
And that's it - you have placed your first commission-free price action trade on eToro.
Price Action Trading Australia - Conclusion
In a price action trading strategy, you are tracking the price of a security to determine which direction it is likely to take in the future.
This trading method is becoming increasingly popular - as it is highly flexible and can be applied to almost any asset class.
However, it is crucial to remember that a price action trading strategy can also be subjective. As such, you will need to tread with caution before committing to trading decisions.
Most importantly, make sure that you always use a regulated broker such eToro when trading in the online space. This will ensure that you have access to a safe and transparent price action trading service.
eToro – Best Price Action Trading Platform in Australia
eToro have proven themselves trustworthy within the industry over many years – we recommend you try them out.
67% of retail investor accounts lose money when trading CFDs with this provider.
What charts should I use for price action trading?
Candlestick charts are widely preferred by price action traders. With this chart type, you can look for different patterns to spot price action trends.
Can I apply leverage when using a price action trading strategy?
Yes, residents of Australia can gain access to leverage when applying a price action trading strategy. However, as of 2021, ASIC has implemented new limits on leverage- that depend on the type of asset you are trading. This caps leverage of major forex pairs to 1:30 and less on other asset classes.
Can I use trading signals for price action trading Australia?
The majority of trading signals derive data from technical indicators instead of price action. This will make it challenging for you to find a service provider that bases its tips only on the price action of the respective market.
Which assets are best for price action trading?
You can apply a price action trading strategy for any security in the market. Unlike other indicators, the price movement is a variable common to all financial instruments - which makes it flexible to use across different asset classes.
What technical indicators can I use with price action trading Australia?
Price action trading focuses directly on the price movements in the market. As such, there is no need for you to use technical indicators. However, based on your personal trading style, you can combine technical indicators with a price action strategy to arrive at your trading decision.