Price Action Trading UK Guide 2020

Most styles of day trading rely heavily on technical indicators and highly tested strategies. But some traders will argue that there’s no need to look at indicators when you could go right to the source of market movements – price.

Price action trading is a type of trading that uses current price movements to predict what the price is going to do next. This fast-paced trading style is growing in popularity, especially as high market volatility presents challenges to traditional market indicators.

Want to jump into price action trading in the UK? We’ll explain what price action trading is and how it works. We’ll also cover price action trading strategies and review top UK brokers you can start trading with today.

What is Price Action Trading?

Price action trading is an approach to trading that looks primarily at price movements to predict where an asset is going next. This is in contrast to other styles of day trading, which rely on technical indicators to make decisions about the future price of an asset.

Price action trading in the UK can involve looking at technical studies and indicators. However, price will always be the main driver of trading decisions. Generally, price, trading volume, and the speed of price changes are the main factors that price action traders consider when buying or selling.Price Action Trading UK

One of the interesting things about price action trading is that it can be very subjective. Given a single setup, two price action traders may come to very different conclusions about where the price is heading.

The subjective nature of UK price action trading can be a good thing and a bad thing. On the one hand, it means that you can easily craft a custom price action trading strategy that won’t be overrun by other traders in the marketplace. On the other hand, it means that there can be a lot of emotion attached to price action trading that can lead to risky trading decisions.

What Assets are Best Suited to Price Action?

You can create a price action trading system for almost any type of asset. That said, UK price action trading is best suited for volatile assets that see a lot of rapid, high-volume price changes. Price action forex trading and stock trading are particularly popular since these assets undergo big price swings throughout the trading day.

Price action trading can also be used to trade around news and market events. Commodity trading is often affected by market news and economic announcements, for example.

You can also build price action trading strategies around ETF trading or options trading. However, beware that these assets may trade with relatively low liquidity. As a result, it can be difficult to enter or exit positions quickly.

Price Action Trading Strategies

Since price action trading in the UK tends to be subjective, it’s up to you to find price action trading strategies that work for you. Generally, price action traders will look for several different setups throughout the day. Sticking to a single pattern or price setup can limit the number of trading opportunities you find.

While many price action trading systems don’t include technical indicators, candlestick patterns can often provide insight into what an asset’s price will do next. Candlestick charts are widely used because they clearly show buying and selling activity within a time interval, instead of only showing the opening and closing prices.

Let’s take a closer look at three price action trading strategies you can try.

Three Line Strike

The three line strike is a candlestick pattern that typically indicates a powerful reversal. This pattern forms when three bearish candlesticks form in a row, each one extending the downtrend from the prior interval. The fourth candlestick is the reversal – this candlestick should open below the prior candlesticks, but then close above the top of the first candlestick.Three Line Strike Trading Pattern

Ideally, the reversal candlestick should be accompanied by relatively strong trading volume. This indicates that the reversal is being supported by buying action across the market and the new bullish trend is likely to continue.

Evening Star

The evening star pattern is widely used for price action forex trading. This price action trading strategy predicts a reversal from a bullish trend to a bearish trend.

The pattern begins with a large bullish candlestick at the end of an uptrend. This candlestick is followed by an even higher candlestick that gaps up, but which closes slightly lower than its opening price on low trading volume. The evening star pattern finishes with a bearish candlestick that gaps down from the second candlestick.Evening Star Trading Pattern

This price action trading system is highly accurate, and often predicts an extended bearish trend.

Bull Flag Breakout

The bull flag breakout pattern is another popular price action trading strategy. It begins with a tall bullish candlestick, which becomes the flag pole in this pattern. The pole is followed by several candlesticks in which the price moves sideways or slightly down. These candlesticks serve as the flag.

At the end of the flag, look for another strong bullish candlestick to initiate the breakout. You can trade before the breakout to capture this upside, but beware that it does not always form. It is safer to enter a bullish position after the breakout has been happened and has been supported by strong trading volume.Bull Flag Trading Pattern

Benefits of Price Action Trading UK

Just like scalping trading, price action trading can be difficult to master, but it comes with a variety of benefits that make it popular among traders.

Flexible Strategies

One of the most important benefits to price action trading in the UK is that it is flexible. You can use many different trading strategies depending on what asset you’re trading or the market conditions. That’s a benefit because it means that you can find trading opportunities no matter what the market is doing.

In addition, unlike for other types of trading, you’re not locked into trading on any specific setup. There is plenty of room in UK price action trading for interpretation as to whether a specific chart pattern fits your criteria buying or selling.

Real-time Data

Another advantage to price action trading is that since it relies primarily on price, you’re looking at the latest market data. This is in contrast to looking at technical indicators, which typically lag the market by at least a few minutes. Price is the main data point upon which all indicators are based, and with price action trading you go straight to the source.

Choose Your Own Risk

One more nice thing about UK price action trading is that you have plenty of flexibility to choose your own risk tolerance. If you’re not confident in a particular setup, you’re free to skip it. Alternatively, you can use price data to decide how to set stop losses for your price action trading strategy.

Price Action Trading Risks

Price action trading systems are inherently subjective, which brings some important risks. Any time there is emotion involved in your trading, there is the potential to make mistakes or to become invested in trades even as they go against you.

Setting stop losses with your trades can help mitigate this risk. Stop losses take real-time decision-making out of when to exit a losing trade. So, you can commit to a maximum allowable loss before entering into a price action trade in the first place.

Another thing to consider when price action trading is that it doesn’t lend itself well to automation. If you’re price action forex trading for example, you may not be able to take advantage of forex signals or forex robots. This isn’t necessarily a major drawback, but it’s worth considering when deciding whether price action trading in the UK is right for you.

Best Price Action Trading Platforms

Choosing the right price action trading platform is an important component of your success. Of course, a price action trading platform should have highly advanced price charts and drawing tools so you can analyze price movements in real-time. Some brokers even offer the ability to trade right from your charts, which can speed up the order entry process.

You’ll also want to think about what assets a UK price action trading broker offers, particularly if you want access to multiple markets. On top of that, we recommend looking for commission-free brokers to save money while trading.

With all that in mind, let’s review five of the best price action trading platforms in the UK:

1. eToro – Commission-free Trading with a Social Network

etoro logoeToro is our number one recommended UK broker for price action trading. With this broker, you can trade more than 800 stocks and 450 ETFs, plus CFDs for forex, commodities, and cryptocurrencies. All trades are 100% commission-free and eToro has impressively low spreads for CFD trading.

eToro’s trading platform is more than powerful enough for most price action traders. It offers plenty of customization and drawing tools, plus nearly 100 technical indicators if you decide to include technical analysis in your trading decisions. The only thing missing is the ability to enter orders right from your charts. eToro’s order entry process is simple, but it can be somewhat slow.

One of the best things about this trading platform is that it includes a massive network for social trading. You can quickly gauge market sentiment around specific assets or trade strategies with other price action traders. eToro also supports copy portfolios, so you can automate a portion of your portfolio based on what professional traders are buying and selling.

Pros:

  • Trade hundreds of stocks, ETFs, and forex
  • 100% commission-free trading
  • Excellent built-in charting software
  • Advanced social trading network
  • Supports copy trading

Cons:

  • Doesn’t support chart trading

75% of retail investor accounts lose money when trading CFDs with this provider.

2. Capital.com – AI Insights for Price Action Trading

Capital.com logoCapital.com leverages artificial intelligence to help you succeed with price action trading in the UK. The platform’s AI software automatically analyzes your trades to help you determine what patterns are successful and which are hurting your profitability. For example, you might find out that most of your winning trades come from a specific asset class or even on a single day of the week. Armed with that information, you can adjust your trading accordingly.

Price action trading with Capital.com is also nice because the broker offers a highly customizable charting platform. You get access to dozens of technical indicators, drawing tools, and several different chart types. It’s also easy to annotate your charts to follow price movements, although we missed the ability to trade directly from these annotations.

Capital.com offers CFD trading on a wide variety of assets, including stocks, forex, commodities, and cryptocurrencies. All trading is commission-free and the spreads are below the industry average. Just keep in mind that Capital.com offers limited leverage for many assets and the selection of stocks is not huge.

Pros:

  • AI assistant helps identify trading patterns
  • Highly customizable charting software
  • Trade CFDs for stocks, forex, commodities, and more
  • Commission-free trading with tight spreads

Cons:

  • Limited leverage for CFD trading

There is no guarantee you will make money with this provider.

3. Plus500 – Commission-free CFD Trading with High Leverage

Plus500 LogoPlus500 is the brokerage of choice for UK price action traders who like to place big bets. This CFD broker offers leverage of up to 300:1 for major forex pairs and up to 10:1 for UK and US stocks. While trading with leverage can increase your risk, it also allows you to spread your bets across multiple trades without having a massive trading account.

We also like Plus500 because it makes price charting simple. The web-based charting software is extremely easy for beginner traders to navigate. In addition, Plus500 offers a mobile trading app that gives you access to advanced candlestick charts on your smartphone. You can set price alerts on the desktop and have them pushed to your phone, which is a big advantage for traders on the go.

All CFD trading with Plus500 is completely commission-free. We also liked that this broker charges some of the cheapest spreads we’ve seen anywhere in the UK, and the platform is light on non-trading fees.

Pros:

  • 300:1 leverage for price action forex trading
  • Mobile trading app with price alerts
  • Easy to use charting interface
  • Commission-free trading with low spreads

Cons:

  • Charting software doesn’t support strategy testing

80.5% of retail investor accounts lose money when trading CFDs with this provider.

4. FXCM – Price Action Forex Trading with Advanced Platforms

FXCM is one of the top UK forex brokers for price action trading. With FXCM, you can trade any of 33 forex pairs through CFDs or spread betting without commissions. Plus, this broker has several unique forex baskets that allow you to hedge risk while speculating on the direction of the global currency market.

Perhaps the best thing about price action trading with FXCM is that it comes with a variety of advanced trading platforms. You can use MetaTrader 4 for forex trading or NinjaTrader or Trading Station for charting stocks, commodities, and cryptocurrencies. FXCM also integrates with Trading View, which is a social network where price action traders post strategies and ideas.

If you want to fully dive into social price action trading, FXCM also integrates with ZuluTrade. With this platform, you can copy other price action traders without any work on your part. Or list your own trades and get paid every time someone else copies your trades.

Pros:

  • Trade a wide range of forex pairs
  • Includes MetaTrader 4, NinjaTrader, and Trading Station
  • Integration with ZuluTrade for social and copy trading
  • Commission-free CFD trading

Cons:

  • Trading platforms require a learning curve

There is no guarantee you will make money with this provider.

5. IG – Top-tier Trading Platforms for Price Action Trading

IG logoIG offers CFD trading, spread betting, and share dealing on a massive range of assets. You can create price action trading systems for stocks, ETFs, indices, commodities, forex, or even options. Most trades are commission-free, although IG’s spreads are significantly higher than most of the other brokers we highlighted.

The main reason to trade with IG is that you get access to some of the most advanced trading platforms on the market. Price action forex traders can use MetaTrader 4 for charting and analysis, while all other traders get access to ProRealTime. Both of these software platforms support backtesting strategies as well as offer the ability to place trades right from your charts.

Helpfully, MetaTrader 4 and ProRealTime each come with mobile apps to enable you to trade on the go. You can create price alerts or trading signals to stay on top of market movements. Plus, it’s easy to switch back and forth between your smartphone and desktop.

Pros:

  • Huge range of assets to trade
  • Supports CFDs, spread betting, and share dealing
  • Includes ProRealTime and MetaTrader 4
  • Allows you to trade directly from your charts

Cons:

  • Somewhat expensive spread costs

There is no guarantee you will make money with this provider.

Price Action Trading Broker Commission Deposit Fee Inactivity Fee Withdrawal Fee
eToro £0 (variable spread) £0 (0.5% currency conversion fee) £8 after 1 year £4
Capital.com £0 (variable spread) £0 £11.50 after 1 year £0
Plus500 £0 (variable spread) £0 £8 after 3 months £0
FXCM £0 (variable spread) £0 £40 after 1 year £0
IG £0 (variable spread) £0 (0.5% on credit cards) £9 after 2 years £0

Price Action Trading UK Pros & Cons

Pros:

  • Can be used for most types of assets
  • Build your own highly personalized trading strategy
  • Use multiple strategies to increase trading opportunities
  • Set your own risk level for any trade
  • Less reliance on confusing technical indicators

Cons:

  • Subjective interpretation of trade conditions
  • Emotions can play a role in trading
  • Not easily integrated with trading signals

How to Start Price Action Trading

Ready to start price action trading in the UK? We’ll show you how to place your first trade with eToro, which offers a capable charting platform, social trading, and a wide range of assets.

Step 1: Open a Price Action Trading Account

You’ll need a brokerage account in order to start price action trading in the UK. Head to eToro’s homepage and click ‘Join Now’ to create a new account. Enter a username and password, then fill in personal details like your name and email address.Click Join Now to open a new eToro account

To comply with government regulations, eToro requires that you verify your identity. You can complete this step online by uploading a copy of your passport or driver’s license and a copy of a recent bank statement or utility bill.

Step 2: Fund Your Trading Account

eToro allows you to deposit funds to your trading account by debit or credit card, using an e-wallet like Neteller or Skrill, or through a bank or wire transfer. Note that the broker requires a minimum deposit of £140 when you first open a new account.eToro deposit

Step 3: Place Your First Price Action Trade

Now you’re ready to start price action trading. To find a potential setup to trade, we’ll use eToro’s bult-in charting software. Search for an asset in the eToro dashboard, then click on the ‘Chart’ tab to view a candlestick chart.

Amazon Chart eToro

Once you have settled on a specific setup, click ‘Trade’ to open a new order form. Enter how much money you want to trade, and set a stop loss level to protect your downside risk. When you’re ready, click ‘Open Trade’ to open your first UK price action trade.

Conclusion

UK price action trading is an increasingly popular trading strategy that relies on price movements to determine where an asset is headed next. Price action trading systems can be used to trade almost any type of asset. It’s important to remember that most price action trading strategies are subjective, so you’ll want to be cautious when committing to trading decisions.

Ready to dive into price action trading in the UK? Get started today by opening an account with eToro!

eToro – Best UK Price Action Trading Platform

75% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

Can I use forex signals for price action forex trading?

You can use forex signals with price action trading. However, most forex signals are based on technical indicators rather than price data. You may have a difficult time developing forex signals that work well with your price action trading strategy.

Do technical indicators help with price action trading?

Some UK price action traders like using technical indicators as part of their trading system, while others do not use them at all. Ultimately, price action trading decisions should be based on price movements rather than on lagging technical indicators.

What is the price action equation?

The Price Action Trading Equation is a price action trading system created by Julie Hatch, a UK trader. The price action equation isn’t really an equation at all. Instead, it is a set of price patterns that you can use to spot potential trading opportunities.

Can I use leverage when price action trading?

You can use leverage when price action trading if your broker offers it for the asset you are trading. Keep in mind that leverage greatly increases the risk of any single trade. You may also have to pay interest fees to your broker for trading on margin.

Why should I use candlestick charts for price action trading?

Candlestick charts are widely used for price action trading because they show buying and selling pressure in addition to the current price. Information about buying and selling action over a set time interval provides a deeper look at the forces behind the market and may offer insight into where the price is going next.

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