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

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

Traders use this strategy because this analysis is very objective and allows the one to analyze the crude 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 indicators also integrate some form of crude oil price action in their trading strategy.

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

Oil Trading Price Action 1-2-3 Break-out

This strategy uses three chart points to determine the break out direction of oil. The 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 signal is to short. The break out of point 1 or point 2 forms the third point.

Series of breakouts on Crude Oil Trading Chart

Investors use crude oil 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 range market moves sideways, normally after hitting a support or resistance level.

Observing the behavior of crude oil price action provides this data of whether the crude 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 crude oil market is ranging, it is best to determine if the crude 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 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 trading whipsaw.

Just like any other indicator in Oil Trading, crude oil 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