What is Price Action in Trading

What is Price Action in Trading?

Price action in trading is vital to understand. If you can interpret price action correctly, you will understand the movements of the market.

Price action is the number one thing that you need to understand for success in the market, yes it is that important. The price action should be the starting point of technical analysis. Did you realise that all indicators follow price action, they are all lagging indicators, an indicator gets its data from price movement.

Technical analysis is derived from the price action since it uses past prices in calculations that can then be used to inform trading decisions.

What is price action in tradingthe movement of price plotted over time.

I hope you can see now why understanding price action in trading is SO important!

TraderCobb

What is Price Action Telling You?

Price action can be seen best on our trading charts since we use our charts to plot price over time. Candlestick charts are the best for interpreting price action since they are the most visual because looking at a single candle displays the open, high, low and close values of that candle over a set period of time.

If you can read price action to spot and interpret trends, breakouts and reversals, you can take advantage of moves in the market. Traders will also use candlestick patterns. You may have heard of a Bullish Engulfing candle or the Evening Star or maybe a Dragonfly Doji these are all just candlestick patterns that form on a chart which you can use to interpret price action.

Price action will tell you what you might expect to happen next. It might go up, it might go down, or it might go sideways. There is NO certainty in the market; reading price action will only indicate what might happen, so you could say that price action will give you an idea of what direction a particular market Might move. That is all.


 

Candlesticks & Price Action

Let’s have a look at a few examples and see what price action is telling us. Traders will try and read the market through candle patterns to get an idea of what it might do next. Some traders will use only price action, but I like to use a few other basic indicators for the strategies I use. Just remember that indicators get their data from price action. A good understanding of price action is essential for profitable trading.

Sideways

The sideways market can be hard to trade, as a crypto trader we want volatility it makes for great trading opportunities. A typical strategy to use in a sideways market would be to trade the breakout. If you can read price action well, you should pick when this is likely to occur.

Look at the example above, what typically happens on a breakout is that price action will slow down and consolidate. Neither the buyers nor sellers are in control, and you will often see small bullish and bearish candles stuck within a range. The price will consolidate; the price movement will get tighter and tighter until it typically explodes and breaks out.


Bullish Upward

Trading an uptrend is great; I love it. I have a strategy for trading trending markets as well, with this strategy, you first need to determine the trend understanding price action will help you do this, for an uptrend the buyers are in control. Understanding price action is important because you want to trade with it, NOT against it. Trade with the trend – the trend is your friend. You don’t want to go short if price action is bullish.

Bearish Downward

This is just the opposite of the uptrend. You don’t want to be going long if price action tells you that the market is bearish.

You can see in this example that the sellers are clearly in control, the fear has set in, sell sell sell!

You Can NOT Predict the Future

Bitcoin All Time HighIf we could, we would all go back and buy Bitcoin, right!

Remember that you can only predict what the future might hold for you with price action once you are in a trade. When you read price action, you can only see the present, once you have entered that market anything can happen, you can’t read the future with price action, you can only tell who is in control at a certain point in time.

How to Use Price Action

Once you have mastered price action it is like you can converse with the market, you could say you learn to speak the markets’ language. It’s like going to a foreign country and asking for directions unless you can speak the local language you will not understand. Price action helps you understand the market’s movements, which, combined with a few other indicators, makes for a good trading strategy.

When you have mastered What is Price Action in Trading you can have a quick look at the charts and see who is in control straight away, that way you will only be looking for trades that match what price action is telling you. If the buyers are in control, you should be looking to buy, and if sellers have the control, you would be looking to short.

Now I am not saying you can’t trade against the trend, but with the strategies that I use, I don’t. I look at the price action and see what it is telling me, who is in control. I will then choose my trading strategy depending on what price is telling me. Next, I have to wait for a trade to set up that ticks all the boxes, and when it does, I enter.

Conclusion

What is Price Action in Trading – it is part of what will make you a successful trader. If you want to become a master trader, you must understand price action first. Many things need to be put in place on your trading journey, charts, strategy, a good trading plan and the right trading psychology all play a part in your success.

It starts with price action, though, you should understand this before anything else. If you are keen to learn about price action and all the other basics that you will need from one of the most experienced crypto traders around start here with this ==>> Free Crypto Trading Course

TraderCobb

It is an exciting time to be trading crypto, and you can learn how to take advantage of price action and learn to create Wealth with Crypto. It all starts with the free course, what are you waiting for?

Happy Trading – Bitcoin to the moon

Crypto Dave


DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on 2dsirecrypto.com is my opinion only and general in nature. Always do your own research before investing any money. You should always understand the risks involved in trading and investing and seek advice from licensed professionals before undertaking any investments of your own.

4 thoughts on “What is Price Action in Trading?”

  1. Quite a few years ago, I bought some software/training that taught me about charting price action and recognising trends etc!  the software was actually very good and I did learn the basics and a little more! The problem was that whilst I understand the charting of price action and generally how to recognise when a stock was going to reverse it’s trend, I got lost in all the extras!  Broker commissions and charges! Minimum investments etc etc!

    I do believe there is a genuine opportunity to earn from the stock market, even for beginners, especially if they understand price action, but we really do need a step-by-step guide that avoids all the pitfalls! I hated the idea that could you WIN on the stock but lose-out due to the extras etc!

    Maybe you recommend something?

    1. I sure can Lawrence, just start the free course you will learn all you need to know step by step with short videos.

      Start there and if you have any questions just ask, it’s a great course it normally sells for hundreds. It will show you how to buy your first crypto, set up your wallet and all your accounts etc… Fee’s are minimal with crypto.

      Crypto Dave

  2. This is a great article. I didn’t quite realize till now that price action in trading is so important. I like to make things simple, and so all I do is follow the charts. That is all. This of course involves calculated guesswork, but then it is also true that studying all the figures in the world may show you one thing, and the market may behave in the opposite direction. 

    So I guess it works for me.

    Thank u for this enlightening article.

    Regards,

    Aps

    1. Hi Aps, Yes price action is important to understand, and some people do trade-off price action alone. Still, I like to add a few other indicators, and yes, the market can be unpredictable, but if you can understand price action, you will have a good idea of where it might move.

      Crypto Dave

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