Price Action Explained

What is Price Action?

Trading based purely on price movement. No indicators — just candles, trends, and key levels.

Key elements include trends, break of structure (BoS), and change of character (ChoCh).

Uptrend

An uptrend is defined by a series of higher highs and higher lows. It shows buyer strength.

Downtrend

A downtrend is a series of lower highs and lower lows, signaling strong selling pressure.

Break of Structure

A break of structure (BoS) confirms the continuation of a trend when a previous high or low is broken.

Change of Character

A change of character (ChoCh) is the first sign of a possible trend reversal, usually breaking the most recent swing.

Support is where price tends to bounce up. Resistance is where price tends to get rejected.

Support

Support is a level where buying pressure is strong enough to halt or reverse a downtrend.

Resistance

Resistance is a level where selling pressure is strong enough to stop or reverse an uptrend.

Candlestick patterns show market sentiment. Common ones include Pin Bar, Engulfing, and Hammer patterns.

Pin Bar

Pin bars have long wicks and show rejection of a price level, often leading to reversal.

Engulfing

An engulfing candle fully covers the previous candle, signaling a potential strong reversal.

Hammer / Inverse Hammer

A hammer or inverted hammer signals potential reversal depending on where it forms in the trend.

Inside Bar

Inside bars reflect market indecision or pause, and can be used as breakout triggers in trending markets.

Real-world setups based on price behavior: break and retest, rejection at key levels, momentum breakout, and fakeouts.

Break and Retest

Price breaks a key level and returns to test it before continuing in the same direction.

Rejection at Key Level

Sharp reversal or long wick at a key level shows the market has rejected higher or lower prices.

Momentum Breakout

A strong candle breaking past a level with volume often leads to continuation in that direction.

Fakeout / Trap

A fakeout lures traders in the wrong direction before quickly reversing, trapping them.

Enter on confirmation of setup (e.g., engulfing at support). Use structure-based stop losses and target prior highs/lows.

Don't ignore market structure or trade without confirmation. Avoid trading in low-volume chop or against higher timeframe trends.

A downloadable cheat sheet covering structure types, candle signals, setups, and an entry checklist.