What is Price Action ? Beginners Guide in Easy Steps Part -2

3天前

In our previous discussion, we delved into the fundamental techniques of reading a price chart with key price action strategies. This time, we're set to expand our understanding even further. By the end of this article, you'll have a fresh perspective on analyzing charts and interpreting price movements, empowering you with deeper insights and more confident trading decisions.

1. Identify the direction of trend with the help of price action candlesticks

a.)Strong Uptrend:
Green candlesticks moving upwards continuously.
Indicates strong buying pressure with no selling pressure.

b.)Uptrend with Deep Retracement:
Green candlesticks with some pullbacks.
Sellers present, causing temporary price dips.

c.)Indecisive Market:
Alternating red and green candlesticks.
No clear market direction, prices moving up and down without strong conviction.

d.)Tight Range Before Breakout:
Small red and green candlesticks within a tight range.
Usually occurs before a significant breakout.

e.)Weak Uptrend with Choppy Price Action:
Alternating red and green candlesticks, choppy pattern.
Indicates weak buying pressure and strong selling presence.

f.)Healthy Uptrend:
Green candlesticks with few red ones.
Strong buying pressure with minimal selling, indicating a solid upward trend.

2. Importance of Wicks and the closing of candle

[1.] Wick and a Doji Candle: Indicates early signs of buyers attempting to stop the price decline,
If you observe closely there is a wick in previous candle also, on the break of high of the candle price hit trendline resistance and fallen again.

[2.]Second Wick at the Same Zone: Sellers tried to push the price down again, but buyers stopped it, forming a bullish pin bar. First wick formed a demand zone but the second wick confirmed
of buyers activity.

[3.]After Some Fight, Buyers Win: Buyers managed to push the price up From the range, kicking out the sellers.

[4.]More Lower Wicks: Indicates both buyers and sellers are active, but buyers are gradually winning, which is bullish.

[5.]Lower Wick Shows Demand: After a downturn, the lower wick signals demand coming in.

[6.]Inside Bar with Bigger Upper Wick: Shows bearish bias. The break of the low led to the continuation of the fall.

NOTE: Wicks are an early indication of demand or supply presence, but the location of formation will be more important.It would help if you determined whether it's in an uptrend, downtrend, or range.

3. Multiple Candle Rejection

A)Exhaustion Gap:
At one point, the chart shows a gap up, where the opening price equaled the high of the day. This indicates an exhaustion gap, suggesting potential for a larger correction. Despite this, only a single bar correction occurred initially, showing resilience.

B)Brutal Correction:
A sharp, one-bar correction is seen, followed by buyers trying to push the prices back up within the same candle. This indicates a strong fight between buyers and sellers.

C)Inside Bars and Tight Range:
The presence of multiple inside bars with tight ranges and prominent lower wicks signals consolidation and market indecision. This is a period where neither buyers nor sellers dominate, often preceding a significant move.

D)Break and Continuation:
Eventually, the price breaks and closes above the range of the inside bars. This breakout triggers a continuation of the uptrend, evidenced by the subsequent series of green candles and higher prices.

#Understanding Candlestick Wicks:
Wicks/Tails: These are crucial as they indicate early signs of demand or supply. In this chart, the lower wicks suggest that buyers are stepping in at lower prices, even during pullbacks, showing underlying strength.

4.Importance of Close Of Candle

If you wait for close of the Candle beyond support or resistance zone then it can help you take high-probability entries only and avoid fake breakouts.
Fake breakout means when the price breaks the support or resistance area but it failed to sustain beyond that area and quickly comes inside the range.

That's all for today's idea I hope you have gained good insights into how to read market direction with the help of candlesticks structure If you read market direction in consideration with the factors explained in Part 1 then the outcomes will be Great.

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Keep Learning,
Happy Trading.
NIFTY