Thu. Dec 9th, 2021

You have been listening to this concept for so long. Everyone talks about, I use price action while trained in the stock market. What is price-acting trading? Price action is the study of charts by which trades forecast the upcoming movement in charts.

What actually is the price action?

Price action is basically the study of price, in simple words we can understand these terms in the following ways.

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Price action consists of two words price+action means the action of price, we know generally the two actions of price one is an upside and the second one is a downside. So, basically, the price action is the study of price and on basis of price, traders predict or forecast the next move in the market.

A trader can analyze a chart of equity, index, commodity, or currency and predict what price can be seen in an upcoming trading session with the help of price action.

So, If traders belives that the price of that particular asset can rise in the upcoming trading session then he will go long, or if he sees that price can go downside in the upcoming trading session he can short that particular asset.

Now, there are a few things that help a trader to analyze the chart which is the part of price action so the first thing is the chart pattern.

There are several chart patterns like Line charts, Candlesticks charts, etc. But most traders use Candlesticks charts for trading.

Now let’s understand the candlesticks first: 

Candlestick Chart is the most used chart pattern in the world.
Candlestick Chart is the most used chart pattern in the world.

We have divided the market into three categories:

  1. Uptrend 

If the price is forming Higher-high then the market is in an uptrend. In an uptrend, we always look for buying opportunities. If the market is in Uptrend then buying on the dip is the best strategy.

example of uptrend market
An uptrend market forms higher highs and lower lows.

  1. Downtrend 

If the price is forming Lower-low then the market is in a downtrend. In a Downtrend always look for selling opportunities. Selling on high is the best strategy in the downtrend.

example of downtrend market
In a downtrend market, it forms lower lows.

3. Sideways

If price forms neither a new high nor make a new low that market is considered as a sideways market. Avoiding these types of charts or No trading in that scenario is the best possible way for a sideways market.

example of sideways market.
Sideways market example.

Five Best Price Action patterns for trading.

1. Channel pattern breakout\breakdown:

When the market starts moving between two parallel trendlines then it is considered as a channel pattern. If the market breaks the upper trendline or the price breaks at an upside level then it is a breakout so we will take a long trade in this scenario

[ Image of channel pattern breakout ]

If the market will break lower trendline or price breaks at downside then we will take a short trade

[ Image of channel pattern breakdown]

2. Triangle pattern 

We consider a triangle pattern If The price moves in a triangle format or if we draw a trendline on charts it looks like a triangle pattern. 

There are three types of triangle patterns:

  • Ascending triangle [ images of each of these chart patterns]
  • Descending triangle
  • Symmetrical triangle 

3. Flag pattern

A flag pattern consists of a continuation pattern, trend reversal, and breakout after a period of consolidation.

[ Flag pattern breakout images]

3.1 Rising valleys: This pattern consists of an uptrend which is basically higher high formations, so we will buy when the price again breaks its previous high.

[ Image of 3 rising valleys]

4. Descending peaks

This pattern consists of a downtrend when the price is making a lower low formation. When price breaks a new low then take a short trade there.

[ Image]

5. Rounding bottom pattern 

The rounding bottom pattern is a bullish reversal chart pattern, which means when the price is taking a u-turn after falling. It is alike U shaped pattern. These patterns are found at the end of the downtrend. This is an extremely profitable chart pattern. Check out the top 10 most effective patterns for trading.

Conclusion: It is very clear if you are very much interested to do price action trading you need to keep three things in mind. What is called Support, Resistance, and Trend Line? Once you will understand these three things, you will have a fair idea about the price movement. You will be able to predict the price movement. So better to rely on very complicated indicators just follow price action. If you wanna learn Price Action Trading Concept you can visit our other Website Called Fortune Comrade. Or Connect with us to learn Stock Market Trading.

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