Let's first understand the origin and foundation of the price action trading system: traders who use the price action trading system think that all technical analysis indicators are restatements of market price movements, rather than pre-predicted behavior data.
In the school of price action trading system, traders believe that all bullish or bearish information has been consumed by people or institutions who have the ability to know in advance, which is reflected in the formed K-line. The formed K-line is the result, not the cause. The reason is unpredictable and unimportant.
Graphic from Zhihu user @ josilag
Those who profit from the price action trading system have a mature price action judgment system behind them. It's not a fixed method, it's logic, it's the essence of the market, and it's the game between human nature and emotional power behind the price movement.
Therefore, the price action trading system, in the trading field, relies on the K-line itself as the analysis theory and takes the price action as the analysis basis to make trading decisions. So as not to rely on any trading indicators.
When people are in a state of tension, the predictability of people's decision-making and behavior is greatly improved, and they are generally more desperate and full of urgency. This is precisely the research essence of the price behavior behind naked K trading-the imbalance between supply and demand.
In fact, the imbalance between supply and demand does not necessarily mean that there are more parties and fewer parties, but a desperate and urgent imbalance.
Imagine that on the beach, the behavior, location and walking route of tourists are basically unpredictable. However, when the red alert at sea suddenly sounded, whether it was a tsunami or a shark attack ... at this time, their walking route began to become easy to predict. This is the theoretical basis of price behavior analysis of naked K trading.
People who can profit from naked K trading are based on two points.
① Anti-weakness
② Counter-quilt trader
In market trading, floor traders clearly know your entry position and stop loss position. Orders (lock orders) of weak competitors are price-driven fuels, and their stop-loss orders or strong orders will become a powerful force for the reverse price movement in a short time. Naked k traders use this to fight against weak trading.
Find out the weakness, find out the traders who are trapped, enter the market against the weakness, make their own orders part of the order flow that triggers the trap, and make the traders who are trapped become price-driven fuel (long departure orders are short fuel, short departure orders are long fuel), thus making a big profit from it. This is the theoretical basis of the price action trading system.
The seemingly simple price action trading system contains little-known price behavior logic. There is still a long way to go to fully understand the price action trading system and master its application in actual trading. When you really understand the price behavior and master it through training, you can look at the K-line of any trading chart of foreign exchange, A-shares, futures and even digital currency, and gradually you will find that you have a completely different perspective and vision.
Retail investors are often the reverse indicator of trend movement. This is why many people think that they will go up if they buy it, and go up if they sell it. I hope everyone can walk on the road closest to the essence of the market. Avoid turning your own orders into fuel. Price action trading system may be the first choice.