What is Price Action Trading Methodology?
Price Action Trading is a revolutionary approach to navigating financial markets that emphasizes understanding price movements, patterns, and trends.
To understand Price Action, let’s begin with the definition of “Price”
The simplest definition of price is the amount of money that a buyer gives a seller in exchange for any goods or services. This price is dependent on demand and supply equilibrium. If Demand and Supply don’t vary much, the prices of the commodity or services do not fluctuate much.
So what is Price Action?
So basically, Price Action tells you the cumulative activities of the market participants. More Buyers – Prices Rise, More Sellers – Price Decline.
The stock market has varied participants who buy and sell shares based on their own reasons for the action for buying or selling. We can segregate the market participants into two broad categories – Institutional or Professional Participants and Retail or Individual market participants. The main difference between the institutional and retail participants is the sheer quantity and huge amount of money that institutions have. This alone provides them with an edge of influencing the market prices.
The cumulative effect of Institutions and other market participants affects the price. So when the institutions have more buy orders, the price moves as per the order fill and creates a Price Action.
Since human minds are patterned, the cumulative effect of this creates repeatable patterns on the price charts. Price action study involves understanding who is controlling the price – buyers or sellers. Price action also provides us many clues to understand where a price is likely to turn, how far the price is likely to go and what should your action be.
The orders that any market participant puts ( Buy or Sell) are based on many factors which influence the decision and action.
The following gives a simple understanding of how factors affect the participants decision and how it gets reflected in the price charts.
Any and all influences on price charts are reflected in price.
Price Action Analysis is like a treasure hunt, where each time frame provides you with clues to the direction of the price based on Price Action. Every clue (Price Action) you solve on a specific time frame provides you with the highest probability trading and investing setups based on the time frames you choose.
What is Price Action analysis?
Unlike traditional trading methods that heavily rely on complex indicators, Price Action Trading revolves around analyzing raw price data from charts.
The Price Action methodology enables traders to make informed decisions based on the actual behavior of prices, providing a clearer and more intuitive understanding of market dynamics.
In a trading world saturated with noisy indicators, Price Action Trading is considered a better approach for clarity, accuracy and to uncover the hidden rhythms of the market.
Whether you’re a beginner or a seasoned trader, embracing Price Action Trading can revolutionize your trading approach and elevate your success in financial markets.
The core principles of Price Action Trading
At the heart of Price Action Trading are a few key principles:
Advantages of Price Action Trading
Price Action Trading methodology is preferred for several reasons:
Price Action Trading avoids the complexity of numerous indicators and focuses on the price itself. This simple approach reduces confusion and offers a clearer perspective.
Unlike indicators that rely on past data, Price Action provides real-time information, allowing traders to respond to current market conditions swiftly.
Price Action Trading removes the subjectivity that can arise from interpreting indicator signals. It’s about reacting to what the market is directly revealing.
Price Action works across different asset classes, timeframes, and markets. This versatility makes it a preferred method for traders diversifying their portfolios.
How does Price Action differ from Indicator based Trading/Investing?
Price action trading allows us to buy or sell along with the institutions instead of trading against them.
– Deepak Rajendra
“One of the best places to learn price action trading. Mr Amit and Mr.Ajit have done a fantastic job.
Mentor Amit was extremely patient in teaching the language of the price. I feel really confident now provided I put in my efforts to excel myself in this journey.”
– Bibhuti B Sahoo
“Concept wise LPAT methods of analyzing DZ n SZ and also various ways to measure probability of trade success , quality of zones etc. are the most logical way of analysis. Very simple to comprehend which of course needs lots of practice. I can give my feedback in a much more effective way once this amazing theory is tested in the real market by me.”