What is Price Action?

Hi ,

I am having an unanswered question lately.

Okay like this. Lately, i saw many people talking about price action this, price action that. In almost every post and it makes me dizzy (not intended to offend anybody). Its like nobody is talking about, "hey, i'm am using XYZ method" or "Bolinger Band method" or etc anymore. But instead it's like a new fashion thingy, people will say "hey, i am using price action plus a ma 200" or i'am using price action and looking for a hammer" or etc. [this is just example, not necessarily exact wording]. Whatever they do, there must be a "price action" words...why??

So my questions are "what is exactly a price action"? and "why the need to include price action in every sentence you use but never explain what it is price action?

Thats all i want to know.

You have the right question...

Price action is the study of Behavior of price at certain important levels of price .
This may seem a bit difficult in worlds but when you see a chart it will be clear ..
You can see a price hitting say a psychological level of 1.3000 on usd/cad and see sellers come in ..how do u know this? look at the charts and you will see behavious of price around the important levels which we call price pivot zones acting as support and resistance . This is real gem when we call trading NAKED CHARTS ..This is what trading naked charts is ..I bet once you start to understand this price behaviour you will forget using any indicator and start with naked charts ...
I hope this helps..

Regards
Pipshower

LOL, this should be a good thread, I predict you will get as many answers as there are responses, and that in itself should be your answer. My answer is, a random grouping a candlesticks, which may or may not resemble some overused pattern from some book written 20 years ago when the markets were very different, used by forum 'gurus' to retrospectively label charts.

Here’s a good place to start for some basic info on price action:

http://www.enthios.com/Lessons/Tradi...riceaction.htm

I’d also recommend reading through the beginning of the James16 thread. Actually the further along you get the better. A basic understanding of PA can be helpful regardless of the trading strategy you use:

http://www.forexfactory.com/showthread.php?t=2331

Another --
http://www.forexfactory.com/showthread.php?t=6327

Forex trading is simply buying and selling currencies at different levels. When a trader sells, another buys .There is a constant -continuous opposition base on market sentiments. This is represented by the charts visually seen on the screen. The movements or actions of the traders can be high, low, and sideways and sometimes can hit a point and reverse downward or upwards at some points called resistance / support .The totality of this move in response to the market is the price action.
Hence, there are indicators that reads / interprets what the price is or has already done.
This is my simple understanding. lol

There are many truth in what you are saying. Not much we we can say, time change so do the market.

Anyway, I am expecting many responses.

Thanks guys for all your response. I really appreciate all your response. Please add more if there is any. Good or bad, doesn't matter. Hopefully not only helping me but all other traders who is interested in this topic.

I am still going through some of the links given. Some of it is a heavy reading lol. I'll do my best

http://beginnertrader.com/blog/wp-co...8-58-59-am.gif

This is the picture I show to anyone wondering what price action is.

Smittens, that is beautiful

Thanks smittens . thats a a good illustrated chart.

My simple understanding is whenever i saw a making of higher high and higher low is an up swing, i am looking for a buy and vise versa. For possible change in trend, whenever i saw an low swing with a lower low and lower high then followed by a lower low but with a higher high or approx almost two similar lower low with a higher high, then i am looking for a possibility for a buy. vise versa.

That's is it.

I have a recommendation to understand what is "price action", but it requires
something on the part of the participant. First, close down your trading platform.
You can't do this while you are trading. Oh, before I forget, close any open trades
you may have. If you have a market bias because of an open position, your opinion will interfere
with seeing and understanding/accepting what the market is trying to tell you.

Okay, now you're flat and your trading platform is closed, so don't trade while performing this excercise.

Hopefully you have a charting package separate from the one supplied by your broker
and tied to your trading platform. If not, find a demo package for free on the internet.
They're everywhere and it takes 5 minutes to have one up and running.
If you can't find anything else, use a MetaTrader chart.

Okay now pick a market you want to watch. If you like Euro, use that or use whatever you like.
Open a daily or weekly chart, an hourly chart, a 5 minute chart and a tick chart.
Keep them all open so you can see them all at once. You'll mostly be looking at the lower TF, but have them
all open at the same time so you know where the market is in relation to the main trend.

Now sit there and watch.

Do not trade.

Just watch.

If you have no discipline and jump in and trade anyway, you've failed the excercise.

Do this for one week, at least 8 hours a day, preferably during different sessions,
say a couple hours around the asian open and definately during the London session.
Look at the first 3 or 4 hours of the New York session too. There won't be much to see after
the US and Europe goes home for the day, but watch that too, just to understand
that price action as well and witness the lack of liquidity around those times of day.

What you're looking for:


Over the course of, say 24 hours, a given market will tick thousands of times,
sometimes tens of thousands of times in a day.

At certain price points, the action and reaction will be unmistakable.

Rejection of a certain price level is as obvious and will be as clear as the nose on your face.

The definitive breach or break of a particular price level, when it happens will be so obvious that
it should be all you can do to contain and control yourself not to trade that breakout.
Afterall, at that very point, you would be trading with the trend and that's what you want to do.
But, don't do that yet. You're still practicing the excercise. Don't trade.

Also, look for gaps. Not huge ones just small ones worth a few pips or so.
Watch what happens. Do they fill right away ? Does it take a few minutes for price to
trade back over those "missed prices" ? Does it take all day ? Does it ever go back ?

Watch that "PRICE ACTION".

See a pin bar ? You think you do ? Maybe so. Wait and watch and see if you're correct.

Okay, so after all this watching and paying attention and NOT TRADING and absorbing
all of the activity, you will have effectively been watching price action.

Now comes next week:

The next few trades you take should actually reflect your newfound understanding of price action.

Even if you are taking stops, they should be in keeping with price action.
A profitable entry should be guided by that price action. You exit because
the action of the market, as reflected by price, indicates for you to do so.

All of this is suggested by someone who has actually done all of the above and
has realised a benefit from doing so. How you chose to proceed is, as always, up to you.

For anyone reading this, I wish you all the best.

Toshi,

Very articulate. Movement around certain price level and what it has been doing. I think l (as well as many others) will be benefiting from this exercise. Thank you again.

p/s: restraining oneself from pushing the trigger during this exercise (also during the "waiting time") is very challenging lol. But no pain no gain.

pin bars are a really good sign of a reversal....

toshi's recommendation is very good, the amount of lessons screen time gives you is irreplaceable.... when i intially learnt VSA, that is all price action with volume aswell, gives you a great foundation to build on...

i would never start trading with indicators and systems but learn S+R and PA, then introduce MACD's etc if need be

Price action for me is pattern recognition.

White G. is referencing something else that is VERY important: VOLUME

Use front month Futures volume, the tick volume on your broker's platform, or if you have a bank feed,
watch how many millions trade at such and such price, over and over again.
Use what ever you can get. Pay attention to how much changes hands at certain prices.
Without volume, however you are getting it, the price points being touched don't really have
a whole lot of meaning. This can be demonstrated in the pre-asian open when
Sydney and Wellington are fairly much the center attraction and volume is low.

Side note: I'd actually rather be trading with OZ and KIWI traders at that time
instead of the sharks that remain in New York after 5PM est. New York will stick it in and break it off.
Austrailian traders take this business seriously and make markets with the best of them.
It's just not the best time to trade certain pairs. Watch price action and it will be clear which ones.

Anyway, watch volume - it matters.

waits for the volume debate to arise, tick volume vs real volume...

i have learned VSA as my introduction to trading....

still havent applied it to forex as of yet

Interesting. Any thoughts on Asian traders after Tokyo opens? That's when I trade E/J.

I hear they're very good in math.