CFD Price Action 1-2-3 method in the CFD Market

CFD Price action is the use of only charts to trade CFD, without the use of technical chart indicators. When trading with this technique, candle cfd charts are used. This strategy uses lines & predetermined patterns such as 1-2-3 pattern that either develops or series of bars.

Traders use this strategy because this analysis is very objective and allows the one to analyze the cfd market moves based on what they see on the charts & market movement analysis alone.

This strategy is used by many traders: even those who use indicators also integrate some form of price action in their strategy.

The best use of this method is achieved when the signals generated are combined with line studies so as to provide extra confirmation. These line studies include cfd trend lines, Fib retracement, support and resistance areas.

CFD Price Action 1-2-3 Breakout

This strategy uses three chart points to determine the breakout direction of a cfd. 1-2-3 technique uses a peak and a trough, these points forms point 1 and point 2, if market moves above the peak the signal is long, if it moves below the trough the signal is to short. Break out of point 1 or point 2 forms the third point.

Series of breakouts on Trading Chart

Investors use price action to try and predict where a cfd trend direction might go. The cfd market is either trending or ranging.

A trending market moves in a particular direction while a range market moves sideways, normally after getting to a support or resistance level.

Observing the behavior of price action provides this information of whether the cfd market is trending or ranging or reversing its direction.

As with any other CFD Trading strategy this method should also be combined with other confirming indicators to avoid whipsaws. The 1-2-3 pattern setup can give good trading signals in a trending market but will give whipsaws when the cfd market is ranging, it is best to determine if the cfd market is trending or not before you start using this strategy.

Combining This Strategy With other Technical Indicators

Good technical indicators to combine with are:

• RSI

• MA Indicator

Investors should use these 2 indicators to confirm if the direction of break out is in line with the cfd trend direction shown by these 2 indicators. If the direction is also the same as those of these indicators then investors can open a trade in direction of the signal. If not investors should not open a trade as there's more likely a chance that this signal may be a cfd whipsaw.

Just like any other indicator in CFD, cfds price action also has whipsaws and there a requirement to use this as a combination with other signal as opposed to just using this strategy alone.

Combining With other Indicators - RSI & Moving Averages