What does the price action include? Its main indicators.
What does the price action include? Its main indicators.
First of all, you need to understand that price action is not a candlestick model! It does not come down to simple “pin bars” and “rails” that you need to look for near the levels!
But if you try to formalize the key elements, then:
1. The most important thing is a clear understanding of the market. Namely, the mechanics of interaction between large and small players, the accumulation and distribution of positions, the principles of trading and protection of volume accumulations, etc.
2. Areas of wholesale supply and demand for an asset. Levels are a very important element of PA. It serves as reference points for finding deals.
3. Dynamics of price behavior. Signs of weakness and strength of one side or another, as well as a reaction to a loss, are the most important and inseparable element of the system. Often the specific level is not so important, as how exactly the price approached it and reacted at the moment of touching. For example, when approaching a level, the price may:
- go in waves, forming support nodules of volumetric accumulations, “priors” and divergences along the road.
- to go "creeping" without visible bursts of interest of one or another side.
- draw a climax by trading a huge volume in a short time and completely changing the balance in the market.
- approach the level of one large candle with signs of strength of one or another side.
- do overflows for the level to collect liquidity.
- draw preloads for punching.
And all these options for action prices show a completely different nature of the market and, accordingly, require different testing.
4. Price location on the chart. It's important to know:
- Where is the price relative to the nearest p / s levels?
- What is the potential price move when entering a deal?
- Where are the attractive areas with high liquidity that price can go to?
5. Volume. Yes. Price action includes many elements of VSA. We do not shy away from any effective solutions.
6. Candlestick patterns. The significance of the candlestick patterns themselves such as pin-bar, rail, absorption is somewhat overestimated, although they are most obvious to beginners.
Indicators in price action.
Many people think that PA is trading exclusively on a clean schedule. By and large, it is, but each trader develops his own working mechanisms. Usually from indicators look:
- Volume.
- The average moving MA50 and MA200. Not in order to determine a change in trend, but only as dynamic support and resistance.
- Various calculated levels such as pivots or fibs. For example, I like the merging of strong pivot levels (week, month) with areas of graphic p / s. Someone is looking at a volume profile or fibonacci levels. Someone is watching the so-called banking levels. There is no canon. Depends on what you know how to use.
As professionals and newcomers to price action see the graph.
The criterion of professionalism in any work is experience. Therefore, the longer you trade in PA, the more important nuances you see on the chart. It makes no sense to say that if you start trading this mess, then you simply will not have time to inform the broker of the money. Remember! Candlestick patterns do not work!
An analysis that conducts more or less pros does not begin at the time the candle formation appears, but much earlier. At that moment, when those tendencies were emerging that the market is now working on and important areas of interests of the parties were being formed. Therefore, opening the same chart, a less experienced trader will see something like that. Specific entry points are not indicated here, since this is generally a large separate topic, but only the logic of reasoning with explanations is shown.
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