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Confirming Price Action Setup: The Importance of Support and Resistance

If you're seeking a way to confirm Price Action setups, one common confirmatory tool is the use of Support and Resistance levels. Traders often employ Price Action strategies due to their simplicity in interpreting signals from candlestick patterns. While various Price Action trading methods can provide fairly accurate signals, this strategy gains more validity when supported by confirmatory tools. The goal is to obtain more reliable trading signals. So, what's the correct way to confirm Price Action?

Price Action Confirmers:

Price Action confirmation can be achieved with the aid of confirmatory tools. There are two types of confirmers commonly used, based on Support and Resistance levels or utilizing Moving Average indicators.

1. Price Action Confirmation with Support and Resistance:

In forex trading, prices reflect the buying and selling dynamics in the market. Therefore, certain levels are considered price reversal points, namely Support and Resistance. In the context of Price Action confirmation, you need to observe how often these Support and Resistance levels are tested. The more frequently these levels are tested, the more valid the resulting trading signals. Price Action formed at these levels reflects the prevailing market sentiment.

2. Price Action Confirmation with Moving Average:

The Exponential Moving Average (EMA) indicator, particularly the EMA-8 Daily and EMA-21 Daily, is often used as a Price Action confirmer, especially in trending market conditions. EMAs can form dynamic Support and Resistance levels. You can use Price Action setups occurring near the EMA-8 Daily and EMA-21 Daily as entry signals.

Price Action Confirmation Methods:

There are two methods for confirming Price Action based on price movement dynamics:

1. Price Action Confirmation During Trends:

In trending market conditions, Price Action setups occurring at Support and Resistance levels can be used as entry and exit signals. Candlestick patterns like the Pin Bar indicating rejection at Support or Resistance levels, as well as Pin Bars with long tails formed near Support levels, can be utilized.

2. Price Action Confirmation During Sideways Movements:

During sideways market conditions, the best confirmers are Support and Resistance levels. Candlestick patterns like the Inside Bar and Pin Bar formed at these levels are quite valid as entry signals. However, in consolidating markets, caution is necessary when determining exit targets and anticipating trend reversals.

In summary, Price Action confirmation can be conducted through Support and Resistance levels as well as the use of EMA indicators as dynamic Support and Resistance. However, it's important to always adapt confirmatory tool usage to overall market conditions. This way, you can enhance the validity of trading signals and optimize your Price Action strategy.


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