Price action describes the characteristics of a security’s price movements. This movement is quite often analyzed with respect to price changes in the recent past. In simple terms, price action is a trading technique that allows a trader to read the market and make subjective trading decisions based on the recent and actual price movements, rather than relying solely on technical indicators.
Since it ignores the fundamental analysis factors and focuses more on recent and past price movement, the price action trading strategy is dependent on technical analysis tools.
Tools Used for Price Action Trading
Since price action trading relates to recent historical data and past price movements, all technical analysis tools like charts, trend lines, price bands, high and low swings, technical levels (of support, resistance and consolidation), etc. are taken into account as per the trader’s choice and strategy fit.
The tools and patterns observed by the trader can be simple price bars, price bands, break-outs, trend-lines, or complex combinations involving candlesticks, volatility, channels, etc.
Who Uses Price Action Trading?
Since price action trading is an approach to price predictions and speculation, it is used by retail traders, speculators, arbitrageurs and even trading firms who employ traders. It can be used on a wide range of securities including equities, bonds, forex, commodities, derivatives, etc.
Price Action Trading Steps
Most experienced traders following price action trading keep multiple options for recognizing trading patterns, entry and exit levels, stop-losses and related observations. Having just one strategy on one (or multiple) stocks may not offer sufficient trading opportunities. Most scenarios involve a two-step process:
Identifying a scenario: Like a stock price getting into a bull/bear phase, channel range, breakout, etc.
Within the scenario, identifying trading opportunities: Like once a stock is in bull run, is it likely to (a) overshoot or (b) retreat. This is a completely subjective choice and can vary from one trader to the other, even given the same identical scenario.
Now lets review my yesterday published analysis:
Wells Fargo may rebound soon!
Buy call 43, September 3, at 85-90 cents, target: 2 - 2.5, stop loss 60 cents.
Outcome of the trade: +100- 120% gain closed today!
this is the power of technical analysis and using this tool correctly
reference article:
https://www.investopedia.com/articles/active-trading/110714/introduction-price-action-trading-strategies.asp
Since it ignores the fundamental analysis factors and focuses more on recent and past price movement, the price action trading strategy is dependent on technical analysis tools.
Tools Used for Price Action Trading
Since price action trading relates to recent historical data and past price movements, all technical analysis tools like charts, trend lines, price bands, high and low swings, technical levels (of support, resistance and consolidation), etc. are taken into account as per the trader’s choice and strategy fit.
The tools and patterns observed by the trader can be simple price bars, price bands, break-outs, trend-lines, or complex combinations involving candlesticks, volatility, channels, etc.
Who Uses Price Action Trading?
Since price action trading is an approach to price predictions and speculation, it is used by retail traders, speculators, arbitrageurs and even trading firms who employ traders. It can be used on a wide range of securities including equities, bonds, forex, commodities, derivatives, etc.
Price Action Trading Steps
Most experienced traders following price action trading keep multiple options for recognizing trading patterns, entry and exit levels, stop-losses and related observations. Having just one strategy on one (or multiple) stocks may not offer sufficient trading opportunities. Most scenarios involve a two-step process:
Identifying a scenario: Like a stock price getting into a bull/bear phase, channel range, breakout, etc.
Within the scenario, identifying trading opportunities: Like once a stock is in bull run, is it likely to (a) overshoot or (b) retreat. This is a completely subjective choice and can vary from one trader to the other, even given the same identical scenario.
Now lets review my yesterday published analysis:
Wells Fargo may rebound soon!
Buy call 43, September 3, at 85-90 cents, target: 2 - 2.5, stop loss 60 cents.
Outcome of the trade: +100- 120% gain closed today!
this is the power of technical analysis and using this tool correctly
reference article:
https://www.investopedia.com/articles/active-trading/110714/introduction-price-action-trading-strategies.asp