What Comes Under Price Action? (Complete Guide)

RahulChaurasiya

Price action refers to the study of price movement on a chart without relying on indicators. It focuses on reading candlesticks, chart patterns, and key market structures. Here’s a list of key elements that come under price action:

1. Candlestick Patterns

Candlestick patterns are the foundation of price action. They help identify reversals, continuations, and indecision points.

Types of Candlestick Patterns

Pattern	Type	Description
Doji	Indecision	Market is uncertain (open = close).
Hammer	Reversal (Bullish)	Long wick below, signals reversal up.
Shooting Star	Reversal (Bearish)	Long wick above, reversal down.
Bullish Engulfing	Reversal (Bullish)	Large green candle engulfs previous red candle.
Bearish Engulfing	Reversal (Bearish)	Large red candle engulfs previous green candle.
Morning Star	Reversal (Bullish)	3-candle pattern signaling up move.
Evening Star	Reversal (Bearish)	3-candle pattern signaling down move.

Why It Matters: These patterns indicate potential reversal or continuation areas.

2. Chart Patterns

Chart patterns show the bigger structure of the market. They help predict large price moves.

Key Chart Patterns

Pattern	Type	Description
Head and Shoulders	Reversal (Bearish)	Three peaks with a lower middle peak.
Inverse Head and Shoulders	Reversal (Bullish)	Same as above but flipped.
Double Top	Reversal (Bearish)	Two peaks at resistance, reversal down.
Double Bottom	Reversal (Bullish)	Two lows at support, reversal up.
Flags	Continuation	Price moves in a small channel before continuing.
Triangles	Continuation/Breakout	Price squeezes, then breaks out.
Wedge	Reversal/Breakout	Narrowing price range, then breakout.

Why It Matters: Recognizing chart patterns can help you predict where the price might move next.

3. Support and Resistance Levels

These are key price zones where the market is likely to reverse or pause.

Support: Price tends to bounce up from this level.
Resistance: Price tends to reverse down from this level.

How to Identify?

Look for multiple bounces from a price level.
Use swing highs/lows, round numbers (like $30,000), and Fibonacci levels.

Why It Matters: Price often reacts to these levels, making them ideal for entries, exits, and stop-loss placement.

4. Trendlines and Channels

Trendlines and channels track the direction of the market.

Trendline: Drawn by connecting swing highs (for downtrends) or swing lows (for uptrends).
Channel: A parallel line to the trendline, creating a price “channel.”

Why It Matters: Channels act as support and resistance. You can buy at the channel bottom and sell at the top.

5. Swing Highs and Swing Lows

Swing highs and swing lows mark the turning points in price action.

Swing High: A peak where price reverses down.
Swing Low: A low where price reverses up.

Why It Matters: They help identify trend changes and serve as points for drawing Fibonacci levels.

6. Price Gaps

A gap happens when there’s a sudden jump in price between two candles.

Breakaway Gap: Occurs when a breakout happens.
Runaway Gap: Occurs during strong trends.
Exhaustion Gap: Occurs at the end of a trend, signaling reversal.

Why It Matters: Gaps can signal strong market momentum or potential reversals.

7. Market Structure

The market has three main structures:

Uptrend: Higher highs (HH) and higher lows (HL).
Downtrend: Lower highs (LH) and lower lows (LL).
Sideways/Range: Price moves between support and resistance.

Why It Matters: Knowing if the market is trending or ranging changes your strategy. In trends, you follow the trend. In ranges, you trade bounces.

8. Breakouts and Fakeouts

Breakout: When price breaks past support, resistance, or trendlines.
Fakeout: When price pretends to break out but reverses.

Why It Matters: Catching the real breakout can result in massive profits, but beware of fakeouts. Use confirmation candles before entering.

9. Momentum Candles

Large, strong candles show strong market pressure (bullish or bearish).

Bullish Momentum: Large green candles without long wicks.
Bearish Momentum: Large red candles without long wicks.

Why It Matters: When momentum increases, it’s often a sign of a breakout or trend continuation.

10. Volume Analysis

Price action can be confirmed by volume spikes.

High Volume: Confirms strong moves (like breakouts).
Low Volume: Suggests a weak trend or false move (potential fakeout).

Why It Matters: Use volume to confirm breakouts and avoid fakeouts.

Summary of Price Action Elements

Category	Key Elements
Candlestick Patterns	Doji, Hammer, Shooting Star, Engulfing
Chart Patterns	Double Top, Double Bottom, Flags, Triangles
Support/Resistance	Key price levels (bounce/reversal points)
Trendlines/Channels	Direction of price (uptrend, downtrend)
Swing Highs/Lows	Turning points for trends and Fibonacci
Price Gaps	Breakaway, Runaway, Exhaustion Gaps
Market Structure	Uptrend, Downtrend, Range
Breakouts/Fakeouts	Real vs. false moves
Momentum Candles	Large green/red candles (breakouts)
Volume Analysis	Volume spikes confirm price moves

How to Use These Price Action Elements in Trading?

Start with Market Structure: Identify if it’s a trend or range.
Look for Support/Resistance: Check where price might reverse.
Look for Candlestick/Chart Patterns: Look for reversal or continuation signals.
Use Trendlines/Channels: Trade bounces from channel tops or bottoms.
Use Fibonacci: Identify pullbacks (38.2%, 50%, 61.8%) for entries.
Look for Volume: If volume increases during breakouts, it’s likely a real breakout.

How to Master Price Action?

Practice on higher timeframes (1-hour, 4-hour) as they show clear structure.
Use a demo account to practice price action trading.
Backtest with historical charts — look for patterns and market structure.

RajTrader

RahulChaurasiya

🔥 1. Chart Patterns

Chart patterns are shapes formed by price movements on a chart. These shapes predict if the price will continue moving in the same direction or reverse.

🔹 Types of Chart Patterns

Pattern	Type	How It Works
Double Top	Reversal (Bearish)	Price hits resistance twice, then falls.
Double Bottom	Reversal (Bullish)	Price hits support twice, then rises.
Head and Shoulders	Reversal (Bearish)	Price forms 3 peaks, middle is highest.
Inverse H&S	Reversal (Bullish)	Same as above but flipped.
Flags	Continuation	Price moves sideways before continuing.
Triangles	Breakout	Price squeezes, then breaks up/down.
Wedge	Reversal/Breakout	Price range narrows, then breaks.

How to Trade: Wait for price to break the pattern and enter in that direction.
Pro Tip: Confirm the breakout with a strong candle and volume increase.

🔥 2. Support and Resistance

These are the key levels where price tends to reverse or pause.

Support = Price bounces up.
Resistance = Price bounces down.

🔹 How to Identify Them?

Look for places where price has bounced multiple times.
Use swing highs and swing lows.
Pay attention to round numbers like $30,000, $50,000, etc.

🔹 How to Trade?

Buy near support, sell near resistance.
If price breaks support/resistance, trade in the breakout direction.

Pro Tip: If support is broken, it can become resistance and vice versa.

🔥 3. Candlestick Patterns

Candlesticks show the price movement within a specific time period. Each candle tells a story about buyers vs. sellers.

🔹 Key Candlestick Patterns

Pattern	Type	How It Works
Doji	Indecision	Open = Close (Market is unsure).
Hammer	Bullish Reversal	Small body, long wick below = reversal up.
Shooting Star	Bearish Reversal	Small body, long wick above = reversal down.
Engulfing	Reversal	Big candle engulfs previous one.
Morning Star	Bullish Reversal	3-candle pattern, down → pause → up.
Evening Star	Bearish Reversal	Opposite of Morning Star.

How to Trade? Enter when a reversal pattern forms near support/resistance or key levels.
Pro Tip: Use these candles to confirm breakouts or reversal points.

🔥 4. Trendlines and Channels

Trendlines show the direction of price by connecting swing highs or swing lows. Channels are just two parallel trendlines.

🔹 How to Draw Trendlines?

Connect at least two swing highs (for downtrend) or two swing lows (for uptrend).
For channels, draw a parallel line to create a “price channel.”

🔹 How to Trade?

Buy in an uptrend when price touches the trendline.
Sell in a downtrend when price touches the trendline.
If price breaks the trendline, expect a trend change.

Pro Tip: Channels help you buy at the channel bottom and sell at the top.

🔥 5. Market Structure

Market structure refers to the big picture of price movement.

🔹 3 Types of Market Structures

Uptrend: Higher highs (HH) and higher lows (HL).
Downtrend: Lower highs (LH) and lower lows (LL).
Range: Price moves sideways between support and resistance.

🔹 How to Trade?

In an uptrend, buy pullbacks at higher lows (HL).
In a downtrend, sell pullbacks at lower highs (LH).
In a range, buy at support and sell at resistance.

Pro Tip: Use market structure to determine if you should be a buyer or a seller.

🔥 6. Breakouts and Fakeouts

A breakout happens when price breaks past support, resistance, or a trendline.
A fakeout happens when price pretends to break out but reverses back.

🔹 How to Identify a Real Breakout?

Look for strong momentum candles.
Check if volume increases on the breakout.
Avoid entering immediately after a breakout; wait for confirmation.

🔹 How to Trade?

Enter after the breakout candle closes.
Place stop-loss below the breakout candle.

Pro Tip: Avoid trading during low-volume periods, as fakeouts happen often.

🔥 7. Volume Analysis

Volume tells you how strong a price move is. Higher volume = strong move.

🔹 How to Read Volume?

High Volume: Confirms breakouts or strong trends.
Low Volume: Signals weak trends or possible fakeouts.

🔹 How to Use Volume in Trading?

Look for volume spikes during breakouts (this confirms a real breakout).
Avoid breakouts with low volume — they often reverse.

Pro Tip: Volume should increase on breakouts and decrease during pullbacks.

🔥 8. Swing Highs and Swing Lows

Swing highs and lows mark key turning points on a chart.

Swing High: Peak where price stops rising and falls.
Swing Low: Bottom where price stops falling and rises.

🔹 How to Identify Swing Highs and Lows?

Swing High: Price has a peak with lower highs on both sides.
Swing Low: Price has a valley with higher lows on both sides.

🔹 How to Trade?

Buy at swing lows in an uptrend.
Sell at swing highs in a downtrend.

Pro Tip: Use swing highs/lows to draw trendlines and Fibonacci retracements.

🔥 9. Fibonacci Retracements

Fibonacci shows possible pullback levels where price might reverse.
Common levels are 38.2%, 50%, and 61.8%.

🔹 How to Draw Fibonacci?

Draw from swing low to swing high (in an uptrend).
Draw from swing high to swing low (in a downtrend).

🔹 How to Trade?

Look for trades at the 61.8% retracement (it’s the most powerful).
Place a stop-loss below the 61.8% level in an uptrend.

Pro Tip: Look for candlestick patterns at Fibonacci levels to increase accuracy.

🔥 10. Momentum Candles

Momentum candles are large, strong candles with little to no wicks.

🔹 How to Identify Momentum?

Look for a big candle with no large wick.
It shows strong buying/selling pressure.

🔹 How to Trade?

If you see a momentum candle break resistance, enter the trade.
Place a stop-loss below the candle.

Pro Tip: Momentum often happens during breakouts, confirming the move.

📈 Final Summary

Price Action Element	How to Use It
Chart Patterns	Trade breakouts from patterns.
Support/Resistance	Buy at support, sell at resistance.
Trendlines/Channels	Buy near trendline support.
Volume	Confirm breakouts with high volume.
Breakouts/Fakeouts	Wait for breakout confirmation.
Fibonacci	Buy at the 61.8% level.

Let me know if you’d like more details on any of these topics! 😊