Introduction to Price Action

Price action is the study of an asset's price movement over time. It is the purest form of market analysis, relying on the belief that all necessary information is already reflected in the price.

1. The Language of Candles

Candlesticks visualize the price battle within a specific timeframe.

  • The Body: Represents the price range between the open and the close.
  • The Wicks (Shadows): Represent the extremes (highs and lows) reached during that period.
  • Psychology: Long wicks often indicate rejection at a specific price level, while large bodies signal strong momentum.
↑ Back to top

2. Defining Market Structure

Understanding the trend is the first step toward aligning yourself with market participants.

  • Higher Highs (HH) and Higher Lows (HL): The classic definition of an uptrend.
  • Lower Lows (LL) and Lower Highs (LH): The definition of a downtrend.
  • Breaks in Structure (BOS): When the price decisively breaks a previous high or low, signaling a continuation or shift in trend.
↑ Back to top

3. Support & Resistance

Markets are driven by memories of previous price levels where buyers and sellers previously acted.

  • Support: A level where buying interest has historically been strong enough to overcome selling pressure.
  • Resistance: A level where selling interest has historically been strong enough to overcome buying pressure.
  • Flip Levels: A phenomenon where a former resistance level becomes a new support level after being broken (and vice versa).
↑ Back to top