What Is Price-Action

 WHAT DO YOU MEAN BY PRICE ACTION?

Price action is a way of looking at how the price of something changes over time. People use it to decide when to buy or sell things, like stocks or toys. It is based on looking at the price history of something and trying to predict what might happen next. This can be tricky because different people see different patterns in the price history. People who use price action often look at charts to help them see patterns.

IS PRICE ACTION THE BEST STRATEGY

Price action traders use charts to see how the price of something has changed over time. They look for patterns in the price history to try to predict what will happen next. They also pay attention to how many people are buying or selling and why. Traders watch for different patterns to happen at the same time, which can give them a signal to buy or sell. Al Brooks is an author who is very good at naming these patterns and explaining why they happen, but he admits that he might be wrong sometimes.

Price action traders use setups to determine entry and exit points for their positions, with each setup having an optimal entry point. Experienced traders have their own well-defined criteria built from experience. Multiple signals should be present to enter a trade, and signals observed during real-time trading should be confirmed by the bar's close. Initial stop orders are placed below the climax price, moved to one tick below the entry bar, and then break even. Traders should avoid using signals from previous trading sessions and should not take trades with poor entry points.

THE "TWO ATTEMPT" RULE OF PRICE ACTION

Price action traders often observe that the market revisits previous price levels where it is reversed or consolidated, referred to as magnets. Traders wait for the market to either continue or reverse again before taking action, to gain a probabilistic edge. Waiting for a second entry point can bring a higher probability of trade entries. For example, the second attempt by bears to force the market down represents a double bottom and the point at which many bears will abandon their bearish opinions and start buying, joining the bulls and generating a strong move upwards. Similarly, after a breakout of a trading range or trend line, the market may return to the breakout level and then reverse, known as 'confirmation'.