Are you wondering what a trader’s action zone is? Well, you’ve come to the right place.
In this post, I will explain what a trader’s action zone is and give you a few examples of how to trade the trader’s action zone and I will also show you a few forex trading strategies that use’s the trader’s action zone as a setup to buy or sell.
What Is The Trader’s Action Zone?
Here’s the definition: the trader’s action zone is buy or sell zone on a chart that forex traders use to identify possible reversals of a currency pair.
A trader’s action zone is a swing trader’s bread and butter because that’s where they can take trades that have great risk:reward ratios…which means that the stop loss are quite tight with less chance of getting stopped out and the profit potential is a lot bigger than what would be risked initially.
There are two traders action zones:
- trader’s action zone in a downtrend
- and a trader’s action zone in an uptrend.
Let’s go over each of these two…
Trader’s Action Zone In A Down Trend
A trader’s action zone in a downtrend forms when price rallies back up (even though the main trend is down) only to hit a resistance level (forming a lower swing high) and then fall back downward.
The place where it does this is called the trader’s action zone and it forms an ideal price level for taking short trades.
A chart is worth a thousand words…here’s what a trader’s action zone in a downtrend looks like:
Trader’s Action Zone In An Up Trend
Here’s what the trader’s action zone in an uptrend looks like:
A trader’s action zone in an uptrend forms when price falls back down (even though the main trend is up), hits a support level (forming higher swing low) and rallies back up.
So What Is The Importance Of Traders Action Zone Then?
Trader action zone is important because of only one reason: it is a potential reversal zone.
Here’s what I mean by that:
- in a market that is in a downtrend, you will see price head up to the traders action zone and then reverse from there and head down again in its original trend it was going on before!
- in a market that is in an uptrend, you will see price fall down into the trader action zone and then reverse from there and head back up again!
Any moving average forex trading systems and strategies that build trading rules around the concept trading action zone are in my opinion, are really robust trend and swing trading systems because:
- trade entry is at an ideal reversal place/zone/area called the traders action zone and this can be further enhanced with the use of reversal candlesticks.
- the risk:reward of such trading systems are really great
List Of Forex Strategies That Are Built Upon The Trader’s Action Zone Concept
Here are a list of forex trading strategies that are built upon the Trader’s action zone trading technique:
- floor trader’s method
- floor trader’s method with no stop loss
- no stop loss forex trading strategy
- heiken ashi forex trading strategy
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