Price Action

Open two charts side by side, one bare, one carrying a stack of moving averages, oscillators, and a couple of custom indicators, and you’ve got the whole debate in front of you. Neither trader is wrong on sight, they’re just answering a different question with the same candles. What “price action” means Trading price action means reading the candles, swings, and levels directly, without translating any of it through a calculated indicator first. A price action trader looks at a chart and sees a swing high failing to break, a range compressing before a move, a rejection wick at a level that’s held twice before, and treats those raw shapes as the signal itself. Nothing on the chart is derived, it’s what happened, in the order it happened. ...

Strip a chart back to just its highs and lows and you’re left with the market’s own record of who’s winning, buyers pushing price into new territory or sellers dragging it into old territory, and reading that record is what market structure means. Everything else in this section, order blocks, fair value gaps, supply and demand, is a zone found within that larger structure, so it’s best to get this part right before layering anything else on top. ...

Look closely at a single candle and you’re looking at a compressed little history of everything buyers and sellers did to each other over that stretch of time. The open tells you where the argument started, the close tells you who was left standing, and the wicks show you the ground that got fought over and lost. Once you can read that shape properly, the name attached to it stops mattering very much, though the names still help, if only so you’re not at sea when someone mentions a “shooting star” on a chart. ...

A trendline break is one of the easiest signals to spot on a chart and one of the easiest to get burned by, because a wick punching through the line and a candle closing decisively below it can look almost identical in the first second or two. Knowing which one you’re looking at is most of the skill. Drawing the line that matters A trendline connects a series of swing points, higher lows in an uptrend or lower highs in a downtrend, and the more times price has respected it, the more traders are watching the same line. Two touches is barely a trendline, it’s a line drawn through two points, which is true of almost anything. Three or more clean touches is where it starts to earn attention, because that’s evidence the market itself is treating the line as a level rather than you imposing one on the chart after the fact. ...

Before price can make an impulsive move in one direction, it usually spends time resting somewhere first, a stretch of chop where buyers and sellers are roughly matched, and that resting spot is what a supply or demand zone marks. It’s a close cousin of the order block, covering the same underlying idea, but drawn around the whole base rather than a single candle. What the zone represents A demand zone: the ranging base before an impulsive rally. A supply zone is the same idea before an impulsive decline. ...

Price pokes above resistance, the candle looks decisive, and half the traders watching jump in on the break, only for price to reverse hard and leave them holding a loss inside the old range. The other half wait, watch the retest hold, and get a cleaner entry a few candles later. The difference between the two groups usually comes down to patience, not analysis. What a breakout is supposed to do A genuine breakout clears a level, support or resistance, and keeps going with enough conviction that the level stops mattering as a ceiling or floor. The clearest tell isn’t the initial break candle, it’s what happens in the few candles after, does price hold above the old resistance, or does it drift straight back below it as if the break never happened. ...

A zone doesn’t have to stay what it was. A supply zone that finally gives way, that price pushes cleanly through instead of turning at, doesn’t just disappear off the chart, it often flips and starts acting as demand the next time price returns to it. The reverse is just as common, an old demand zone that breaks becomes resistance on the retest. This role reversal is one of the more useful things to watch for once you’ve got the basic zones down. ...

Before getting into this, a note. I use Steve Norman’s FVG indicator, and Steve’s tools can be found here. It draws these zones automatically, and while knowing how to identify them manually still matters, in practice I’m not hand-drawing boxes every morning. What is a fair value gap? When price moves fast, really fast, driven by momentum or a large order hitting the market, it sometimes skips through a whole stretch of prices without pausing to trade there, and buyers and sellers never get the chance to meet each other at those levels before the market’s already moved on. ...

A market that’s coiling gives off a specific look before it moves, each swing a little smaller than the last, as if the energy behind the price is running out of room in both directions at once. Traders who learn to spot that shrinking range early get to position before the release, instead of chasing it after the fact. What an inside bar is An inside bar is a candle whose entire range, high to low, sits inside the range of the candle before it. One inside bar on its own doesn’t say much, it happens constantly and most of the time it’s just noise. A run of two or three in a row, each one tighter than the last, is the more useful pattern, showing the range contracting instead of one quiet candle sitting in an otherwise normal sequence. ...

Support and resistance are simply the levels where price has reacted before, on the working assumption that where the market cared once, it’s likely to care again. It isn’t a law, but it’s a strong enough tendency to build a plan around. What a level is Resistance sits above current price, where sellers previously showed up in enough size to turn the market back down, while support sits below, where buyers did the same thing on the way back up. Neither is really a single price so much as a zone, bounded roughly by the wicks that tested it and the closes that respected it. Ask the market to bounce off an exact line to the pip and you’re asking for more precision than it usually offers. ...