What is the Price Action Trading Strategy? The features

Price Action are all existing patterns. A pattern is a candle combination that should be used in clearly specified market conditions.

What is the Price Action Trading Strategy? The features

What is the Price Action Trading Strategy? The features

Price Action are all existing patterns. A pattern is a candle combination that should be used in clearly specified market conditions.

Price Action - combinations of various patterns that are used in narrow market conditions. Price Action is a modern addition to technical analysis.

 

All technical analysis is based on the theory of Charles Dow. It was he who was the first to say that the price takes into account everything and only a chart is needed to analyze the chart.

Further, studying technical analysis, everyone first of all turns to works on the candlestick analysis of Steve Neeson. It was thanks to him that American traders first learned about Japanese candles in the 90s.

Further, Martin Pring, who is the bearer of Dow's ideas and for many years was engaged in training traders exclusively in trend trading using levels. The main idea that can be emphasized from his ideas is that the price moves in waves, constantly updating levels.

 

As we already found out, in the theory of Price Action the ideas of Charles Dow lie, they are used by default. Price Action practitioners add levels and channels to the chart, this is necessary, and then the trading style is different.

Naked Price Action

Any kind of indicators or other tools that may help are not taken into account. Only candles and their models.

With volumes

Along with the formation of candlestick patterns, volumes are also taken into account (if trading with assets, where these volumes can be found).

Together with indicators

Most often, along with moving averages, price action is used. Of course, everyone has their own favorite indicator and you should combine candlestick patterns with it, but we are now considering the most common methods.

 

Most popular price action patterns

In general, to grasp the entire direction does not work, it is too vast. But in this article I propose to consider the 7 most popular variations that most traders use.

pinbar;

false top / bottom;

3-bar spread;

inner bar;

CPR:

false breakdown of the trend line;

reversal pivot.

 

1. Pinbar

Pinbar is an axiom. More than half of traders build their system using a pinbar. You might also have come across the name “pinocchio” earlier. This pattern indicates a trend reversal. Essence: 3 candles are formed, where the middle has a long shadow, which is much further than the left and right candles.

 

2. Inner bar

After the pinbar, the most popular is the inner bar. 2 candles, one is in the body of the other.

 

3. 3-bar spread

3 candles, the third has a different color and covers the previous two with its body. Also a reversal formation.

 

4. False top / bottom

To understand this concept, you need to have basic concepts about swing. This formation means a weakening of the forces of one of the parties to push the trend further. Often looks like a 1-2-3 formation.

 

5. Pivot

3 candles that hints at an important level. The third candlestick of this pattern speaks of a reversal. The minimum value of the average should be higher than the minimum values ​​of the side candles.

 

6. False breakdown of the trend line

Everything is simple. Have drawn a trend line and are waiting for a false breakdown. It is important to draw a line on the bodies, not on the shadows of the candle. The line is considered stronger if there were 3-4 touches.

 

7. Closing Price Reversal

Pretty simple pattern. Only two candles, the second should open above the minimum / maximum of the previous one, go higher / lower, but then come back and close much lower / higher.

 

Conclusion: Price Action provides an opportunity to assess the forces in the market without using indicators. But the downside is that practicing patterns requires hard and long practice.




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