Complete Price Action Context Guide for Beginners

Price action trading is the most popular trading method that all professional traders used. It can use in any market places, such as – Forex, stock, bonds, commodities, indices, futures, etc. Below we will provide you with the basic idea about Price action context and how it works in trading. 

18 June 2020 | AtoZ Markets Do you know that the price action trading methods are one of the best and most commonly used strategies in the financial market? Whatever you are, a short-term trader or a long-term trader, price action context trading can give you the desired outcomes. Because its the most authentic trading method with an excellent reputation from more than a century. A trader can do price action analysis without using any so-called indicators. A price action analysis is preferable on the naked chart. So, you don’t have to mess your chart with various tools.

What Is Price Action?

The term ‘Price Action’ is the inquiry of a security’s value development. In price action trading, traders would hope to contemplate ascertainable price to distinguish any piece of information on where the market could move straightaway. The most ordinarily utilized price action pointer is the analysis of price bars which give subtleties. For example, the opening and closing price of a market is the high and low-price levels during a particular timeframe.

Examining this data is the center of price action trading. Actually, in responding to the inquiry ‘What is price action?’, one might say that it is the analysis of the activities of the considerable number of buyers and sellers effectively engaged with some random market. This way, by breaking down what the remainder of the market participants are doing, it can give traders an extraordinary edge in their trading choices.

The most commonly utilized price bars which are used as a price action indicator, are called candlesticks. All trading stages in the world offer candlestick charting – demonstrating exactly how well-known price action trading is.

Price Action

How to Use Price Action

Price action isn’t, for the most part, observed as a trading instrument like an indicator, yet preferably the information source in which all the instruments are assembled. Swing trader and the trend trader are in general work most intimately with price action, shunning any fundamental analysis for concentrating exclusively on support and resistance levels to anticipate breakouts and consolidation. Indeed, even these traders must give some consideration to extra factors beyond the current price, as the volume of trading and the timeframe being utilized to build up levels all affect the probability of their translations being precise.

Price Action Indicator

As per the discussion above, price action is the analysis of the activities of buyers and sellers operatively engaged in a particular security. Candlesticks are the most commonly used price action indicator. It gives a trader important ideas such as the opening and closing price of the asset and the high and low price of that particular timeframe. Let’s look at an example:

Price Action

If you are looking at the daily chart of an asset, the candle above will show you the high and low of that day. Both bullish and bearish candle can give you useful information:

  • The high price and the low price will show you the highest price and the lowest price for that particular trading day.
  • The black (Colors can be changed as the user preference) bearish candle represents the sellers. The bearish body tells that sellers are strong against buyers of the trading day. That’s why the closing price level is lower than the opening price level.
  • The white (Colors can be changed as the user preference) bullish candle represents the buyers. The bullish body tells that buyers are strong against the seller of the trading day. That’s why the closing price level is higher than the opening price level.

Utilizing This Straightforward Candle

Candlesticks setup is one of the initial moves towards making a price action system. For instance:

  1. After a bearish candle, if the next candle makes a new low, then it is a sign of that sellers are going to sustain the bearish pressure further. This bearish pressure or weakness of the market will motive a few traders to hold their short (Sell) positions they already have or will indicate to enter a new short position.
  2. After a bullish candle, if the next candle makes a new high, then it is a sign of that buyers are going to sustain the bullish pressure further. This bullish pressure or strength of the market will motive a few traders to hold their long (Buy) position they already have or will indicate to enter a new short position.

Candlestick reading is the most common part of technical analysis that most of the traders used. Moreover, the candlesticks are most often form patterns, which can be helpful to create a price action strategy.

How Price Action Works in Forex Trading

Price action can use in any type of financial market because it is based on the sentiment of all active buyers and seller in the market. This covers stocks, indices, commodities, futures, options, bonds, and forex. You can use candlesticks within all these market’s charts, that’s why execute a price action system on them.

However, there is one market that has the most advantages than others and its forex market, because:

  • Forex market operates 24 hours a day, five days a week – a genuine portrayal of buying and selling overall landmasses.
  • High liquidity – empowering you to trade in and out of market sectors inside nanoseconds.
  • Low spreads – not all forex pairs offer low spreads, but the commission cost very more economical than other markets.
  • High leverage – You can use high leverage in forex trading and can trade with a significant position with a small account. However, it can give you excellent outcomes and also can blowup your all capitals.

These are the most common reasons that make price action forex trading so accessible.


Regarding price action trading, a heap of strategies and theories vindicating exalted success rates still traders should have a sensible survivorship aptitude because the only victory can make the news. For gaining plenty of profits, trading does have efficiency, and it is up to a trader’s mind. A trader should have clear perception, examine, select, plan and execute the plan as per his demand for best enforceable profit opportunities.

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