Introduction to Price Action Trading Futures

Futures Trading Strategies

Price Action Trading Futures

Price Action Trading Futures Explained

  • Price Action Defined
  • To Be a Mess or Not to Be a Mess
  • Identify Trending versus Consolidating Markets
  • Trade Price Action in the Futures Market

What is Price Action?

Price Action Trading is the discipline of making all of your trading decisions from price. This means that you are taking your cues from the most leading thing you can, price. No lagging indicators are used in price action trading. This may seem difficult in the beginning for the new trader, but this is the best way to trade. We use dynamic support and resistance with market movement to identify the highest probability areas to enter.

Since price charts reflect the beliefs and actions of all participants (human and computer) trading a market during a specific period. These beliefs are portrayed in the price chart in the form of price action. Using lagging indicators like MACD, stochastic, RSI, or the latest coded oscillator/indicator is a complete waste of time. Let us take a look at two scenarios:

To Be a Mess or Not to Be a Mess

The image below shows a clean price chart, with no mess, no indicators, and just pure price action.

Clean Price Action Trading Chart

This next chart shows a convoluted mess with lots of clutter, indicators, and just mess.

Messy Indicator Chart

Looking at the indicator filled chart you actually lose a lot of room due to all of the indicators. This draws your attention away from price action and towards the lagging indicators. If you look at both charts and think about which one is easier to analyze it is a simple answer. All indicators are derived from price action, so by adding indicators you are just adding more variables for yourself. They are not adding any insight, but just clouding the picture of what is actually playing out in the market.

Trending VS. Consolidating Markets

As we discussed above, price action trading analysis is the analysis of the price movement of a market over time. From our analysis of price movement we can determine a market’s directional bias or trend. By using pure price action we can easily see where a market is likely to go. Looking at price at its most basic level we look for higher highs, higher lows, lower highs, and/or lower lows. In the chart below note how price action consolidates before moving.

Price Action Consolidation Versus Trend

Price Action Trading in the Futures Market

If you can trade one market you can trade any market. I do not care what anyone says, that is the way it is. The above chart shows direction, but also important inflection points that a trader can take advantage of. It is important to know where price is compared to where it has been, and these inflection points. Where is it likely to go next? Will it continue or reverse? These are questions you should be asking about the market to keep you aware of what it is doing. A solid understanding of price action will make you a better trader. If you would are interested in learning how to trade simple yet very powerful price action strategies, checkout my Emini Trading Course for more info.

Entreprenuer, Trader and Philanthropist

Matt Dye, Founder of ABusinessWithTrading, is a professional trader who specializes in trading price action. His mission is to empower traders through education, and every month attracts readers across 50+ countries. To discover more about Matt’s Price Action Strategies, visit his Trading Courses page.