Price Action Patterns – All The Important Ones In One Place!
A lot of traders feel the concept of price action is elusive in its working even though it’s one of the most common trading strategies.
No two people analyze price action and its pieces in the same way! The reason behind this thinking is simple: price action is a purely subjective concept—a facet of analysis that is closely tied to everything that a security’s price does.
What Is Price Action?
It’s referred to the movement of a security’s price and is encompassed in technical and chart pattern analysis. This analysis helps to find order in random price movement which sometimes baffles traders.
Examples of price action are swings (high and low), tests of resistance and consolidation etc.
A List of the Most Important Price Action Patterns
Price action traders usually require a deep understanding of various different price action patterns forming in the market. This is where the real problem begins; traders don’t know which price action patterns are significant.
Expert price action traders know there are 3 basic types of patterns that usually form in the market.
- Price Action Reversal Patterns
- Price Action Candlestick Patterns
- Price Action Continuation Patterns
We break these down:
This pattern is the most powerful price action trading pattern. The trading strategy helps traders find an impending reversal or change in price in the market before it occurs. In turn, traders can make use of the information to time their entry accurately into a trending market, range-bound market or even counter-trend. Reversal patterns also provide good risk to reward potential.
Sometimes traders employ this pattern when trading in stocks and other financial markets. Candlestick patterns offer incredible visual characteristics that show traders what a particular price has done within a certain time period.
Additionally, this price action pattern also provides clues (to this strategy and mood of market) that are directed towards a certain index or stock.
Traders can know for sure that a price trend is likely to continue when this price action pattern occurs in the market. Continuation patterns can normal be spotted ‘mid-trend’ and indicate a pause in price action of varying durations. Traders can spot continuation patterns in any time frame—daily or weekly.
Up your trading strategy by applying these price action patterns and see the difference they make. You can also take help from AlpsSocial’s extensive trading community by signing up on the platform.