Price Action Trading UK Guide
Want to start 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 the top UK broker you can start trading.
All trading strategies revolve around a crucial underlying factor - the price of the asset.
The more you understand what factors affect the price of a financial instrument, the more success you will have with online trading.
That is what price action is all about - it refers to the price movements of a security.
In simple terms, price action trading is a form of trading that studies the current price movements of an asset to predict its future direction.
Regardless of whether you are a short-term trader or a long-term investor, analyzing these price movements is one of the most powerful, yet simplest ways to gain insight into the market.
In this guide, we cover everything you need to know about price action trading UK.
We start by explaining how the phenomenon works, the different strategies involved, and how you can find the best online broker in the UK to approach price action trading today.
Contents
What is Price Action Trading UK?
Price Action Trading UK Strategies
Advantages of Price Action Trading UK
How to Find the Best Platform for Price Action Trading UK
How to Start Price Action Trading UK Today
What is Price Action Trading UK?
As we mentioned above, price action trading focuses on the price movements of an asset to speculate on its future direction. This analytical trading strategy is getting more and more popular with UK retail clients, particularly in high-volatility markets.
Compared to other trading styles, price action trading UK ignores other fundamental analysis factors. Instead, it focuses on more recent and historic price movements alone.
As such, price action trading in the UK can also depend on technical analysis tools and indicators - but with price always steering trading decisions. In addition, price action traders also consider the speed of these movements as well as the respective volume.
That said, price action trading can also be very subjective. The conclusions made by traders are influenced by their psychological and behavioural interpretations.
For instance, if a stock hovers at $198 and then crosses the individually-set $200 level, one trader might predict a further upward movement and take a long position.
On the other hand, another price action trader might expect a price reversal and thus take a short position.
As you can see, two price action traders can come to two different conclusions on the same price movement.
Therefore, this subjective nature of price action trading UK has both its upsides and downside. On one side, it means that you can develop a personal trading strategy that won't be overrun by other market speculators. Conversely, an emotionally-influenced decision can also lead to overly risky scenarios.
In its essence, price action trading is an approach facilitated by the study of price history and technical analysis tools - wherein traders can make their own subjective decisions.
Best Markets for Price Action Trading UK
Since price action trading is an approach for price speculation, it is used by traders speculating on all types of financial instruments. You can create a price action strategy for a wide range of securities including - equities, forex, commodities, cryptocurrencies, derivatives and more.
For instance, top-rated online broker eToro is one of the most recommended platforms for price action trading. The broker gives you access to over 2,400 stocks from 17 different exchanges - plus heaps of CFD markets.
You can also take advantage of nearly 100 technical indicators to aid with your price action strategies.
However, price action trading UK is ideal for highly volatile assets that see quick and high volume price shifts - such as the likes of forex and commodity trading. These securities witness multiple price swings within a single trading day.
Price action trading strategies are also utilized to speculate prices that revolve around market events and news. For example, the commodity market is significantly influenced by economic headlines, and thus, can benefit from a price action strategy.
That said, price action strategies can also be applied for ETFs and options. However, note that when trading assets with low liquidity - it might be difficult to open and close your positions swiftly to capitalize on a price movement.
Price Action Trading UK Strategies
Like we said, price action trading UK tends to be subjective. Therefore, it is up to each trader to define a strategy that works best for their trading goals.
In common practice, price action traders in the UK use multiple strategies throughout the day. Employing one specific approach to price action can restrict the number of opportunities in the market.
As such, traders switch between different styles to find clues on where the price of the market will go next.
Although price action trading systems do not rely on technical indicators, sometimes charts and patterns can be used to gain insight into an asset's price trend.
One such commonly used technical indicator for price action is the candlestick. It gives the trader useful information on the opening and closing price of the market, as well as the highest and lowest price levels - for a user-defined time period.
For those unaware, here is a quick overview of candlestick charts:
If the real body of the candlestick is black/filled - it means that the closing price of the asset was lower than the opening price.
If the body is empty, then the closing price was higher than the opening price.
With this in mind, let's take a closer look at the three different price action strategies that you can try.
Three Line Strike
A Three-Line Strike chart is a candlestick pattern that represents a powerful reversal in the prices of an asset.
For a bearish three line strike, this pattern is identified if there are three bearish candles forming in a row - each one closing with a price lower than the previous candle.
A fourth candlestick will mean a reversal is warranted - given that this candle opens below the prior candle, and closes at a higher price than the opening of the first candlestick.
Preferably, this reversal candle should also be joined by high trading volume. This will suggest that this price reversal is supported by long positions across the market - meaning that a new bullish trend is about to come.
The same process will work in the opposite way for a bullish three-line strike. You are looking for three consecutive bullish candles - with the closing prices higher than the previous one. The fourth candle will reverse this upward trend.
Generally, traders consider the reversal of prices as a good entry point to enter the market.
Evening Star
The evening star pattern is another strategy used to detect a trend that is about to reverse - from bullish to bearish. This approach is widely preferred in price action forex trading.
The pattern consists of three candlesticks - a large white candle, a small-bodied one, and a red candle. In this bearish candlestick pattern, the first candle is the bullish candle followed by the second candle that gaps down.
The pattern is closed by the bearish candle that gaps down from the second candle.
As the evening star pattern is a widely used strategy - it is often considered by price action traders as one of the most reliable technical indicators.
Bull Flag Breakout
Bull flag breakout patterns occur when an asset shows a strong uptrend. On the chart, this pattern resembles a flag on a pole.
The pattern begins when the asset makes a strong move with a high relative volume - forming a pole. And then the stock consolidates near the top of the pole with lighter volume - moving sideways or slightly down, hence forming the flag.
The pattern breaks when another strong bullish candlestick appears.
Price action traders in the UK also choose to open their positions before the breakout starts in order to capture the uptrend. However, this increase in price does not always occur.
As such, it is best to enter a bullish position once the breakout has already started, and is supported by high trading volume.
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Advantages of Price Action Trading UK
The concept behind price action trading is simple - you need to study price movements. However, it can take traders a while to learn how to read charts and draw conclusions from their analysis.
That said, investing your time in price action trading methods can indeed be worthwhile. Here is a range of benefits that make this strategy popular among traders in the UK.
Here are the best things about Price action trading:
✅ A Single Variable
Compared to the other technical analysis strategies, price action trading does not rely on too many technical indicators. Instead, you only consider price as the variable, essentially eliminating any other clutter.
This allows traders to save time without having to think about other possibilities and focus only on candlestick charts to make their trading decisions.
✅ Flexible Strategies
As we explained earlier, price action trading UK styles are flexible for different strategies - depending on which financial asset you want to trade. No matter the market conditions, you can make decisions based on price action analysis.
Moreover, unlike other types of trading, you are not locked into one specific setup. As the interpretation is subjective, it is up to you to decide whether a specific chart pattern fits your criteria for trading or risk tolerance.
✅ Real-time Data
Most of the technical indicators used in trading fall behind the market by at least a couple of minutes And moreover, these indicators are also ultimately based on the price movement of the asset.
With price action trading, you are consulting the source directly - ensuring that you get real-time data without any delays.
Price Action Trading Risks
Price action trading is a systematic practice. At the same time, it is also inherently subjective. Traders are free to make their own decisions within any given scenario. Their trading positions will depend on their behavioural and emotional state.
For the same reasons, it is significant that traders are aware of the risks that come with price action trading. If you become emotionally invested, it might be more difficult to manage your risks even when trades go against you.
One way to mitigate the risk is by setting stop-loss orders on your trades. These allow you to take only the risks that you can afford. It also eliminates the need to make real-time decisions to exit a trade.
Instead, you will be setting the stop-loss limit before you enter the market - and the trade will be automatically closed if your losses hit the predetermined level.
Additionally, price action trading does not work well with automation tools such as trading bots or signals. These infer data from multiple technical indicators rather than price data.
If you are someone who leans towards such strategies, you have to take this into account before choosing a price action trading UK system.
Price Action Trading UK Tips
As you can see, price action trading requires you to have a firm grasp of dozens of technical indicators. Consequently, this approach is more suited for traders who are more experienced with advanced chart reading.
That said, if you are interested in price action trading UK, we recommend that you start educating yourself right away. Just remember that it will take time to learn strategies, spot trends, and reversals.
Nevertheless, here we discuss some tips on how you can best learn the ropes of price action trading UK.
Tip 1: Read Books on Price Action Trading
Although price action does not entirely rely on technical analysis, there are still some aspects such as chart reading and indicators that you need to be aware of.
The first step in studying price action and related technical analysis is understanding the core concepts. One of the best ways to accomplish this is by reading books on trading styles. Here is a list of trading books that have withstood the test of time.
Trading Price Action Series By Al Brooks
Forex Price Action Scalping by Bob Valman
The Definitive Guide To Price Pattern Analysis And Interpretation By Martin Pring
Japanese Candlestick Charting Techniques By Steve Nison
You will also find a significant amount of newbie guides on technical analysis here on our website.
Tip 2: Sign up for a Price Action Trading Course
If reading is not your first preference, then you can always turn to online courses to learn everything you need to know about trading strategies.
Thanks to the internet, now you can find online courses on popular certification platforms right from the comfort of your home.
A few examples of such courses include Stock trading with Price Action and Mastering Price Action Trading with Supply and Demand on Udemy.
You can also find research guides like ours to learn about chart reading and risk management.
Completing an online course will take you further up the learning curve, and help you better understand the workings of the market.
More importantly, you can find a course that matches your level - be it a complete beginner, or advanced trader. There are also courses available with different structures, depending on what kind of expertise you seek.
Either way, an online course can be one of the best tools to learn about price action trading UK and gain in-depth knowledge of chart patterns.
Tip 3: Practice your Skills with Demo Accounts
Once you have thoroughly understood the intricacies of price action trading, the next step is to take the theory from your learning and apply it in practice. However, trading in the real-world outright can have serious repercussions.
That is why it is best to choose an online broker that offers demo accounts. For instance, on eToro, you can backtest your price action trading strategies through paper funds. This will allow you to get a better understanding of how your strategies work in real market conditions.
You can use your broker's demo account to familiarise yourself with chart reading, patterns and risk management involved with price action trading UK.
When you are ready to start trading with real money - you can simply switch to your trading account on your brokerage platform.
Tip 4: Consider Copy Trading
Another way to get started with price action trading UK is to trade passively. On platforms such as eToro, you can get access to an automated feature called Copy Trading. This allows you to select an expert price action trader, and copy their ongoing trades in your portfolio.
All you need to do is to invest a minimum of $200 (about £160) on each of your respective copy traders, and positions will be automated on your account.
However, it does not compromise the control you have over your portfolio. For instance, you can still exit a position at any time, or adjust individual orders to match your financial goals.
Using a Copy Trader feature allows you to draw insights on how experienced traders are using price action strategies to make their trading choices.
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How to Find the Best Platform for Price Action Trading UK
If you are a trader, you have a myriad of online UK brokers ready to offer you an account.
Finding the right platform for your price action trading strategy can be an overwhelming and complex process, especially for beginners.
On the flip side, you can easily separate the wheat from the chaff by focusing on the features that you need the most.
With this in mind, we have created a list of factors that will help in your search for the best UK broker for your price action trading goals.
Regulation and Licensing
Your online broker will work on your behalf - holding your money in an online account and executing your trades. Considering this, it is paramount that you choose a broker whom you can trust with your hard-earned money.
As such, one of the most important aspects to bear in mind is to ensure that your brokerage platform is licensed. A regulated broker will have their financial activities monitored by one or more regulatory bodies.
In the UK, the Financial Conduct Authority (FCA) is the agency that ensures that brokers follow guidelines and standards. There are also other well-known regulatory bodies such as the Cyprus Securities and Exchange Commission (CySEC) and the Australian Securities and Investments Commission (ASIC).
Working with a regulated broker ensures transparency as well as the safety of your trading funds. Needless to say, if a broker does not hold a license from either of these regulatory bodies, it is best to avoid them.
With that said, social trading platform eToro is regulated by all three of the aforementioned agencies. Moreover, on eToro, UK price action traders can also benefit from the protection offered by the FSCS.
Supported Securities
As we mentioned earlier, price action trading UK is applicable to all types of financial securities. If you already know which asset you want to trade, you can look for platforms that offer your preferred market.
In case you want to have access to a wider selection of assets, you can also find brokers who offer diverse securities - from the likes of stocks and forex to cryptocurrencies and derivatives. Our top-rated price action trading UK platform eToro has nearly 3,000 different financial assets for you to choose from.
Ownership or CFDs
Price action trading is at the forefront of short-term strategies - like day trading. Meaning, it is best suited for trading instruments such as derivatives rather than for long-term investment plans.
For instance, price action strategies enable you to place multiple trades on CFDs - throughout a single trading day.
As such, when you are choosing your UK broker, you should also consider whether they give you access to derivatives.
Trading in CFDs also comes with the benefits of leverage and short-selling. This way, you can take advantage of both bearish and bullish price action trading trends in the market.
However, note that when you are trading CFDs, you will be liable to pay a swap fee to your broker. This is applicable if you keep your trading positions open overnight.
Trading Platform
One of the main advantages of price action trading UK is that it is compatible with trading software. After all, you do not need any special technical analysis tools to study prices per-say. Rather, candles or any other chart price symbol can offer you the information you need.
Therefore, you have the option to choose what kind of trading platform you want to trade with.
On platforms such as eToro, you can invest and trade directly from the broker's site. This means you do not have to install any software to start trading. You can access the trading space right from your brokerage account itself.
On the other hand, some of you might prefer trading on third-party platforms such as MT4, MT5, or cTrader. In this case, you need to verify if your chosen broker offers support for the respective platform.
Additionally, most UK trading platforms also offer mobile apps. This will allow you to access your account and place trades while on the move.
UK Brokerage Fees
Ultimately, price action trading UK only helps you make trading choices. The rest of the trading process remains the same, no matter which asset you choose.
In other words, in order to execute your trades, you will have to pay fees to your online UK broker. The types of fees can differ significantly between brokers, so you need to pay attention to how much you are paying and what you are paying for.
Here, we have a list of the most common fees you can expect at online brokers when executing your price action trading UK strategy.
Dealing Fees
Dealing fees are most commonly linked to conventional securities such as stocks and ETFs. Most brokers charge this on a fixed-rate basis for every trade.
For instance, let's say that you decided to go long on BP stocks based on your price action trading UK strategy.
Your chosen broker charges you £5 per trade.
Regardless of what your stake is, you will pay £5 when you open the trade.
You will then pay £5 again when you close the trade.
Make note that the same trade will cost you nothing on eToro - as the platform charges no dealing fees for trading.
Trading Commissions
Unlike dealing fees, trading commissions are calculated as a variable fee calculated against your stake.
For example:
Let's say that your chosen UK broker has a commission set at 0.6%.
You want to trade GBP/AUD and enter the market by staking £500 on the pair.
This means that you pay a commission of £3 on this trade.
When you exit the market, your position is worth £800.
For this trade, you pay a commission of £4.80 (0.6% of £800).
In effect, you will end up paying a commission on both sides of the trade. Then again, if you choose eToro, this trade will be carried out at zero-percent commission.
Spreads
In price action trading UK, the spread is the difference between the buy and sell price of a financial security. Similar to trading commissions, spreads are usually expressed in terms of percentages. Albeit, forex trading platforms typically opt for pips.
Ideally, you want to look for UK trading platforms that offer tight spreads on all assets. The larger the spread, the more it will eat away at your profits,
In other terms - if your broker charges you 0.80% as the spread, you will be entering a trade at a 0.80% loss.
You will need to make gains of at least 0.80% to break even on this trade. Only earnings beyond this 0.80% price level will be counted as profit.
Deposits and Withdrawals
All trading platforms in the UK require you to make a deposit into your account. While some brokers give you a range of payment methods to choose from, others can make this process cumbersome.
For instance, on some platforms, you can deposit money only through manual bank transfers. This means that it will take several days for the money to appear in your trading account.
In comparison, on eToro, you can choose between credit/debit cards, bank transfers and e-wallets to fund your account.
Tools for Beginners
As we have emphasized several times in this guide, price action trading UK can be a bit complicated for newbies. In case you are a beginner, before adopting this trading style - you need to ensure that the UK broker has all the right resources at your disposal.
Therefore, we suggest that you pick a broker that offers at least a few, or all of these tools.
Educational Tools
The best brokers in the UK have intuitive platforms that adapt to the needs of all levels of traders. This includes an array of educational tools that cover different trading strategies, how-to-guides and tutorials on how to use the platform.
For instance, eToro has a Trading School set up for novices - where you can choose between an online or classroom course to learn the basics of trading. Additionally, they also send you daily market analysis, host webinars, podcasts and update you regularly with relevant market news.
Automated Trading
There are lots of people who want to capitalize on the financial markets, yet fail to do so due to a lack of understanding of the workings of trading. For such traders, it is best to look for a platform that has automated trading services on offer.
One such example of passive trading is the Copy Trading feature provided by eToro. As we discussed earlier, this enables you to invest in a price action trader, and in turn, copy their trades on your own eToro account.
That said, although trades are automated, you still maintain complete control over your funds and trading choices.
In addition, eToro also offers CopyPortfolios - where you choose a strategy to be applied to your account. There are dozens of trading strategies to choose from, based on the type of asset you want exposure to.
Once you invest in this feature, eToro will take over the management of your portfolio - while you benefit from a passive trading experience.
Tools for Experienced Traders
At the other end of the spectrum, seasoned professionals might be looking for a whole different set of features to aid their trading processes. For instance, if you are a day trader or a swing trader, you want a broker that can give you access to technical analysis tools and indicators.
Here is a list of the most preferred tools used by experienced price action trading pros:
Technical indicators such as the RSI, MACD, and moving averages
Option to customize the trading screen and create custom watchlists.
Chart drawing tools for analysis.
Trading indicators such as price action and market sentiment
Integration with automated trading robots
Customer Service
Customer service is of the utmost importance when it comes to choosing your online trading platform. After all, you are entrusting your trading funds with the brokerage, so it is crucial that you are able to get a response to your queries and receive support as needed.
The best UK brokers offer customer service through multiple mediums. For instance, you will be able to connect to the team using live chat, email, as well as telephone.
Generally, UK trading platforms offer customer support during times when the markets are open - most commonly on a 24/5 basis. If you send in a query outside this timeframe - you might have to wait until Monday morning for a response.
Above all, platforms such as eToro also have an extensive section on tutorials and guides. This way, you can find answers to almost all concerns on the platform without seeking any help from the support team.
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How to Start Price Action Trading UK Today
At this point, you should be keen to get a jumpstart on your first trade.
We will finish this guide by explaining to you how you can start price action trading with eToro - one of the most reputed platforms in the online trading space.
Step 1: Open a Price Action Trading Account
You can create a new account on eToro by clicking the 'Join Now' button on the home page.
eToro has a clean and sleek interface that makes it easy for traders to navigate through its features.
Create your account by providing your full name, address, contact details and phone number.
To comply with KYC regulations - eToro requires you to verify your identity. You can finish this step by attaching a copy of your passport or driver's license.
Step 2: Add Funds to Your Price Action Trading Account
On eToro, you can deposit funds into your trading account using the following methods.
Bank transfer
Credit/debit card
e-wallet such as Neteller, Paypal or Skrill.
You only need to deposit a minimum of $200 to start trading on eToro.
Step 3: Place Your First Price Action Trade
With your account funded, you are now fully equipped to begin your price action trading UK journey.
eToro has a built-in charting software that you can use to draw your conclusions from. If you already know which asset you want to trade, you can search for it and click on the 'Chart' tab to see candlesticks.
Once you are settled on the setup and have made your trading decisions, you can click on 'Trade' to open a new order. Enter the stake amount, and stop-loss order to manage your risk.
When you are ready, click on 'Open Trade' to execute your first price action trade.
Ready to dive into price action trading in the UK? Get started today by opening an account with eToro!