In every business realm, cash is the official and unofficial king. But those who are living in the trading world have to bow down to the potent Price Action. It is, beyond any type of doubt, the most crucial signifier on all kinds of charts as every candlestick gives important data related to the market
Most rookie traders tend to fall for the illusion that the more complex indicators they will follow, the more distinct the market will become for them. Hence, they look at the price action, much simpler in narrating a given situation, with utter negligence.
Consequently, they fill up their platforms and charts with many indicators but hardly can get any helpful and reliable indication out of them. This article is an elegy of the simplicity and the credibility of the price action. It will teach you how to read this action properly.
To read and understand the price action, traders need to clear their concepts around some basic notions or attributes of the market. They are High, Low, Open, and Close. They will help traders whether they want to read OHLC Bars or the Candlestick Bars.
Each candlestick represents a specific span of time, and within that span, the market can move up, down, or even sideways. A candlestick can also see all of these movements in its timespan. These movements start with the Open and continue the Close.
High and Low require traders to learn about a war that is going on behind the curtain. That is the war between the buyers and sellers. Most beginners seem to be totally unaware of this aspect of Forex trading.
Well, let’s dig more into it.
Support and Resistance
Novice traders somehow manage to notice the role of a support level and a resistance level. They blindly sell all their assets when their prices hit the resistance level and start buying assets their prices hit the support line.
However, most of them don’t know what is going on in the actual market and who are pulling the real strings. But to succeed in online stock trading business, you must know the functions of the support and resistance level. Only then you can expect to find the reliable trade signals.
High Test Bar
Let’s take a High-Test Bar as an example. At the opening of such bars, the control of the market stays at the hands of buyers. Initially, their winning rate accelerates, and they happen to be totally unaware of the next scenario.
The sellers, on the other hand, remain silent and keep their patience at first. But the moment they enter the trade, they take control of the market abruptly from the buyers, and they dominate it till the end.
It’s just the actual story behind a High-Test bar. Every bar has a story of its and decides one winner between the sellers and the buyers.
Reading price action is all about knowing the formations of the different candlesticks. It’s about finding out who is winning against who. Once a trader can discern the controller or the winner of the market, all he needs to do is to follow that winner.
More Stories Make Them Better
The more bars with such stories group together, the more a story becomes complete while making a collective tale instead of having separate ones.
Prices can take only three directions. Either it goes up, or down, or straight. In an uptrend, the more the price swing, the higher the Highs and the Lows get. In a downtrend, the opposite happens.
Higher Lows and higher lows indicate that the buyers are in control of the war. Sellers try to establish their domination but little they can do when buyers go strong.
We have deployed only a simple bar to teach you how to read the price action. To be adroit in it requires more concepts and facets to learn. If you want it, available resources are unlimited nowadays.