Price action trading strategy: A beginner's guide

Price action trading is a strategy that analyzes the price behavior of the past in order to make decisions. Instead of relying heavily on technical indicators, traders concentrate on important levels, including support and resistance levels, in order to recognize potential reversals and also draw trendlines to determine the direction the market would move.

The primary instrument used in price action trading is the candlestick chart, and these candles actually represent the market sentiment. Common patterns that can be used to predict further movements include pin bars and engulfing patterns.

The strength lies in the simplicity of the strategy. A clean chart free of clutter from multiple indicators helps people make purely price action-based decisions. Trading by price action is popular among traders in forex, stocks, and commodities markets. It offers the greatest degree of flexibility and is most suited for short- to medium-term trading.