A price action algorithmic trading strategy will look at previous open and close or session high and low prices, and it’ll trigger a buy or sell order if similar levels are achieved in the future.
You could, for example, create an algorithm to enter buy or sell orders if the price moves above point X, or if the price falls below point Y. This is a popular algorithm with scalpers who want to make a series of quick but small profits throughout the day on highly volatile markets – a process known as high-frequency trading (HFT).
To create a price action trading algorithm, you’ll need to assess whether and when you want to go long or short. You’ll also need to consider measures to help you manage your risk, such as stops and limits.
You can configure a price action trading algorithm according to the market, the time frame, the size of the trade and what time of day the algorithm should operate – which can help you capture volatility as the markets open or close.