Price Action Trading: Master the Art of Reading Market Movements
Discover how to trade using pure price movement without relying on indicators. Master candlestick patterns, support and resistance, and market psychology.
What is Price Action Trading?
Price action trading is a methodology that focuses on analyzing raw price movements without the use of technical indicators. It relies on understanding market psychology through price patterns, candlestick formations, and key levels.
"Price action is the truest form of market analysis because it reflects the actual buying and selling decisions of all market participants."
Pure Analysis
No lagging indicators - just raw price data and market structure analysis.
Market Psychology
Understanding the emotions and decisions behind every price movement.
Universal Application
Works across all markets, timeframes, and trading instruments.
Essential Candlestick Patterns
Single Candlestick Patterns
Bullish Patterns
Hammer
Small body, long lower wick at support level
Bullish Engulfing
Large green candle engulfs previous red candle
Doji
Open equals close, indicates indecision
Bearish Patterns
Shooting Star
Small body, long upper wick at resistance
Bearish Engulfing
Large red candle engulfs previous green candle
Hanging Man
Small body, long lower wick at resistance
Multi-Candlestick Patterns
Morning Star
Three-candle bullish reversal pattern
Evening Star
Three-candle bearish reversal pattern
Three White Soldiers
Strong bullish continuation pattern
Support and Resistance Trading
Support and resistance levels are the foundation of price action trading, representing areas where buying and selling pressure converge.
Support Level Trading
- • Identification: Previous lows, round numbers, moving averages
- • Entry: Bullish price action at support
- • Stop Loss: Below support level
- • Target: Next resistance level
"The more times a support level is tested and holds, the stronger it becomes."
Resistance Level Trading
- • Identification: Previous highs, psychological levels, trend lines
- • Entry: Bearish price action at resistance
- • Stop Loss: Above resistance level
- • Target: Next support level
"Resistance becomes support once broken, and vice versa."
Market Structure Analysis
Trend Analysis
Understanding market structure through higher highs, higher lows, lower highs, and lower lows.
Uptrend
Higher Highs + Higher Lows
Downtrend
Lower Highs + Lower Lows
Sideways
Horizontal movement
Break of Structure (BOS)
Identifying when market structure changes, signaling potential trend reversals or continuations.
Key Signals
- • Break above previous high in uptrend
- • Break below previous low in downtrend
- • Volume confirmation on breakout
- • Follow-through price action
Price Action Trading Strategies
1. Pin Bar Strategy
Trading rejection candles at key levels for high-probability setups.
Setup Criteria
- • Pin bar at key support/resistance
- • Long wick (2-3x body size)
- • Close near high/low of candle
- • Confluence with other factors
Trade Management
- • Entry: Above/below pin bar
- • Stop: Beyond pin bar wick
- • Target: Next key level
- • Risk/Reward: Minimum 1:2
2. Inside Bar Strategy
Trading consolidation breakouts for trend continuation or reversal.
Inside Bar Characteristics
- • High and low within previous candle range
- • Represents market indecision
- • Often precedes significant moves
- • Best at key levels or trend continuation
3. Engulfing Pattern Strategy
Trading momentum shifts through engulfing candlestick patterns.
Bullish Engulfing
Large green candle completely engulfs previous red candle body
Bearish Engulfing
Large red candle completely engulfs previous green candle body
Risk Management in Price Action Trading
Position Sizing
- • Risk 1-2% of account per trade
- • Calculate position size based on stop loss
- • Adjust for market volatility
- • Never risk more than you can afford
Stop Loss Placement
- • Beyond key levels, not arbitrary
- • Account for market noise
- • Use structure-based stops
- • Never move stops against you
Advanced Price Action Concepts
Market Psychology
Understanding the emotions and psychology behind price movements is crucial for price action trading success.
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