Over the past couple of months, I’ve received emails from traders wanting to know just how to trade based on price action. Other traders wanted to know how they can trade based on candlesticks only.
Both questions intrigued me. Essentially, both methods won’t require the use of indicators. You simply need to study the charts and observe how price is moving. So I decided to write a guide detailing how you can trade using both methods.
2 trading methods you can use to trade on the IQ Option platform
Trading using candlesticks on the IQ Option platform
Trading using candlesticks is quite simple. The only thing to remember is the candle color. If it’s green, it means that the bulls are dominating the markets and it’s a signal to enter a buy position. If the candle is orange, the bears are dominating the market and it’s a signal to enter into a sell position.
However, the major problem lies in where exactly to enter into a position. I recommend you wait until one candle ends and another starts. Never enter a trade when a candle is developed halfway. In addition, your goal is to look for solid candles (not special candles). The reason for this is that special candles with long wicks develop in times when there’s extremely high volatility. The price going against you by the time your trade expires is very likely at these times.
Let’s look at an example.
If you’re trading on the IQ Option platform, you can trade either options or digital options. In my examples, I’ll use digital options.
Now, wait until a candle completely develops. I prefer waiting for a candle to start developing at a minute that’s divisible by 5. For example, I waited until the time was 9.55am before entering my position. Then I set the trade expiry at 10.00am.
Judging by the candle that had developed prior to the 9.55am point (orange), I predicted that the price was going to drop. So I entered a sell position lasting 5 minutes.
When trading using candlesticks, you don’t have to worry about price. All you need to look at is the candle color. However, you’ll also need to take into account the previous two or more candles. This strategy works quite well when there’s an apparent trend. For example, if there are long consecutive orange candles, you can expect that more orange candles will develop along the downtrend.
Trading using price action on IQ Option
Price action trading involves looking at the direction the price is taking at a particular moment. Your goal is to determine whether the price will be higher or lower by the time your trade position expires.
In this example, I’m still trading digital options IQ Option.
The first thing to do is look at the price chart. In the example below, you’ll notice that I created a resistance level (blue line) which the price bounced off. This created a consolidation range. I expected the price to start rising immediately it broke out of this range. It did and an uptrend developed. As the prices continued rising, I entered a 5 minute buy position because I expected the price to continue going up.
Generally, trading price action requires you first identify a specific price range (support or resistance). Then, determine whether the prices will rise or fall below this range when a breakout occurs. Once the breakout happens, all you need to do is enter a buy or sell position.
The interesting thing about trading on IQ Option is that entering a 5 minute trade doesn’t necessarily mean that your position will be held for 5 minutes exactly. In my trade, I actually entered position at 14.06pm and the trade expired at 14.10pm.
When trading with price action, you need to act fast. You therefore need to continuously analyze price movements over a period of time before trade entry. The good thing is that, once you’ve identified a good entry point, it becomes really easy to make winning trades.
Never trade with your gut
Trading using both candles and price action requires a specific set of conditions. For example, with candlesticks, you should only trade when an apparent trend appears and candles have large bodies.
This requires patience and proper chart analysis.
Never try to trade with gut feeling. This is simply relying on luck. And in the financial world, luck never makes anyone wealthy.
Whichever trading method you choose, remember to always follow the rules. Both might seem very simple at a glance. But if applied incorrectly, you could end up losing tons of money.
Be sure to test the candlesticks and price action trading methods I’ve explained in your IQ Option practice account. It might take time to grasp each method fully but once you get it, trading will be simpler and more profitable in the long run.
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