What Is Price Action
Its Always very confusing for all traders that what is Price Action. So today will explain for you price action and how to use it to maximise your profits.
See price action consist of 4 major things.
1. Trend
2. Support and resistance
3. Candlesticks
4. Candle Stick Chart pattern
1. Trend :
When we are using price action for trading the most important thing is trend. Now trend only moves in three directions. Either the trend is in upward direction known as bullish trend or its in the downward direction known as bearish trend or last but not the least is consolidation when the market is moving sideways in a specific range. To identify trend we must connect two points either the two lows or the two high which ensure either the market is in up trend or down trend. when the market is in uptrend market usually makes higher high and lower low and in down ward direction market makes lower high and lower low. when the previous low is broken on the bigger time frame it indicates market has changed is direction and now the trend is changed. When the market breaks its previous high means that now the trend is changed and and market is becoming more bullish. Pro traders usually look for breakout and confirmation to trade properly. So when the market is in consolidation phase it means that neither the market is going up nor down its trading in a specific range and usually pro traders do not trade when the market is in consolidation phase because movement is not clear.
2. Support and resistance
Market always moves in the terms of support and resistance knows as pivot points. R1, R2,R3. S1, S2,S3. R represents resistance and S represents Support.
Resistance is the level where market resist and tries very hard to go above that level when that level is broken we say market broke its resistance level. When the market goes down and takes support at the level from where it's bounce back is knows as support level and when that level is broken we say support level is broken. To trade properly we usually look these level because these level indicates higher number of transactions and it's authentic to identify from these level either the market is going upward or downward.
3. Candlesticks
4. Candlesticks chart pattern.
These two things are very important in price action and similar as well. To read charts properly it is necessary to understand the candlesticks because these Candlesticks are the one tells the whole story or I must the hidden story of the market. Candlestick are of different form knows as hammer candle, doji etc why these Candlesticks are important because these Candlesticks show us the change in the trend or direction. When these candles are formed at the resistance level we say market is going to change its direction will move downward and when these specific candles are made at support level it means a bullish reversal.
Now these candles have more significance when these candles are made on and off they make a pattern that pattern shows the direction of market for example cup and handle if cup and handle is made its mean a breakout towards upside and when the reverse cup and handle is formed it means a breakout towards downside.
I hope you guys understood I tried to explain this in a very simple way so that everyone can understand.
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NOTE: Trade With Caution.
