Oil Trading Price Action 1-2-3 method in the Oil Trading Market

Oil Price action is the use of only charts to trade Oil, without the use of technical chart technical indicators. When trading with this technique, candle oil charts are used. This strategy uses lines & pre determined patterns such as 1-2-3 trading pattern that either develops or sequence of bars.

Traders use this strategy because this analysis is very objective and allows the one to analyze the oil market moves based on what they see on the crude oil charts and market movement analysis alone.

This strategy is used by many traders: even those that use technical indicators also integrate some form of crude oil price action in their strategy.

The best use of this method is achieved when the signals generated are combined with line studies so as to provide extra confirmation. These line studies include oil trend lines, Fibo retracement, support and resistance levels.

Oil Trading Price Action 1-2-3 Breakout

This strategy uses three chart points to determine the break-out direction of a crude oil. 1-2-3 technique uses a peak and a trough, these points forms point 1 & point 2, if market moves above the peak the signal is long, if it moves below the trough the trading signal is to short. Break out of point 1 or point 2 forms the third point.

Series of breakouts on Crude Trading Chart

Investors use crude trading price action to try and predict where a oil trend direction might go. The oil market is either trending or ranging.

A trending market moves in a particular direction while a ranging market moves sideways, normally after hitting a support or resistance zone.

Observing the behavior of crude trading price action provides this information of whether the oil market is trending or ranging or reversing its direction.

As with any other Oil Trading strategy this method should also be combined with other confirming indicators to avoid whipsaws. The 1-2-3 pattern can give good signals in a trending market but will give whipsaws when the oil market is ranging, it is best to determine if the oil market is trending or not before you start using this strategy.

Combining This Strategy With other Technical Indicators

Good technical indicators to combine with are:

• RSI

• Moving Average Technical Indicator

Investors should use these 2 indicators to confirm if the direction of break out is in line with the oil trend direction shown by these 2 indicators. If the direction is also the same as those of these indicators then investors can open a trade in the direction of the signal. If not investors should not open a trade as there is more likely a chance that this oil signal may be a oil whipsaw.

Just like any other indicator in Oil, crude trading price action also has whipsaws and there a requirement to use this as a combination with other signal as opposed to just using this strategy alone.

Combining With other Indicators - RSI & Moving Averages