Price action trading is always getting a lot of attention since most “pro” traders use this way to trade. If you’re starting out, you probably hear or read about price action and price action patterns a few times before. There are many ways to talk about this, but as always I’m going to simplify it for you.
We’re going to be discussing basic terms related to price action in day trading. And some of the best price action pattern in the market. Price pattern trading is most likely used by traders that have been trading for a long time. One of the biggest advantages of price action trading and price pattern trading is that you can really see and understand the market.
Another advantage of the price action strategies is that they offer the cleanest chart ever. Since many of those strategies are based on patterns, candlestick patterns, and volume. More conservative traders add to price action pattern strategies a few indicators, like EMA or the MACD.
Price action is the movement of the price of an asset or instrument made over time. It’s pretty simple. So, historically talking about price action over time is predictable and tends to make charts pattern, technical analysis formation, or price action patterns.
A price action pattern can be defined as the market intent since the price is driven by investors. And those patterns can tell you a lot about the market and the investors and the current situation.
All those patterns, chart patterns, and technical analysis patterns are derived from price action. And there are many tools and indicators that are calculated from the price action, like the moving averages.
It’s not a secret now that price action trading is directly related to historical data and past price movement. A price action pattern trading can be dissected into many parts that people use to trade this. Technical analysis, trend lines, price bands, high and low swings, support, and resistance are usually the most commonly used by traders.
As you can see there are many ways to trade price action and should not only be limited to pattern strategy. You can do both. Since one is a derivate from the other (price action -> chart pattern) you will mostly be trading a lot of price action patterns. So is better to know them
After that needed introduction, you must be thinking about how a pattern looks, don’t worry. Here are the best price action patterns for you to look at.
Note: To properly identify a chart pattern you must know how to draw trend lines, support, and resistance areas.
One of the most common and best chart patterns are:
There are a lot of chart patterns made by price action. Here’s a useful image for keeping track of those patterns by type.
Remember you can find price action patterns in many different way. Practice a lot and backtest it.