Price action analysis is about studying, reading and interpreting the price movement of a market over time, which using the raw price charts to trade the market and no indicators will be used. By reading the price action of a market, trader can determine a market’s directional bias as well as trade from reoccurring price action patterns or price action setups that reflect changes or continuations in market sentiment. In simpler term, price action analysis is the use of the natural or raw price movement of a market to analyze and perform the trading. This means, you are making all of your trading decisions based purely on the price bars on a clean or indicator-free price chart.

Since price action trading is an approach to price predictions it is widely used by retail traders, speculators, arbitrageurs and trading firms who employ traders. It can be used on a range of securities such as equities, bonds, forex, commodities, derivatives, etc.

Price action trading can be used for long, medium and short-term. The ability to use multiple time frames for analysis makes price action trading valued by many traders. Price action trading is one of the most time-tested and trusted way for determining a market’s trend, which is simply to look at the daily charts and analyze the market’s price action. To identify a downtrend, we look for patterns of lower highs and lower lows, or “LH and LL”. To identify an uptrend, we look for patterns of higher highs and higher lows, or “HH and HL”.

A lot of theories and strategies are available on price action trading claiming a very high success rates, but traders should be aware of survivorship bias because only success stories make news while those who lost big tends to keep quiet. Trading using price action trading does have the potential for making good profits but it is also depends on the individual trader to understand, test, select, decide and act on what meets his requirements for the best possible profit opportunities.