Trading Price Action 1-2-3 method in the Oil Trading Market

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

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

This strategy is used by many traders: even those that 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 trend lines, Fib retracement, support and resistance levels.

Trading Price Action 1-2-3 Breakout

This strategy uses 3 chart points to determine the break-out direction of a crude oil. 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 crude price action to try and predict where a trend direction might go. The market is either trending or ranging.

A trending market moves in a particular direction while a ranging market moves sideways, normally after hitting a support or resistance zone.

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

As with any other Oil Trading strategy this method should also be combined with other confirming indicators to avoid whipsaws. The 1-2-3 pattern setup can give good signals in a trending market but will give whipsaws when the market is ranging, it is best to determine if the 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 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 the 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 oil whipsaw.

Just like any other indicator in Oil, crude 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