Reading Price Action: The Basics

## What is Price Action? Price action trading is analyzing raw price movement without relying heavily on indicators. It's about understanding what the market is telling you through candlesticks and chart patterns. ## Candlestick Basics ### Anatomy of a Candle - **Body**: Open to Close range - **Upper Wick**: High to Body top - **Lower Wick**: Body bottom to Low ### Key Candlestick Patterns #### Bullish Patterns 1. **Hammer**: Small body, long lower wick (at support) 2. **Engulfing**: Large green candle engulfs previous red 3. **Morning Star**: Three-candle reversal pattern #### Bearish Patterns 1. **Shooting Star**: Small body, long upper wick (at resistance) 2. **Engulfing**: Large red candle engulfs previous green 3. **Evening Star**: Three-candle reversal pattern ## Trend Structure ### Uptrend - Higher Highs (HH) - Higher Lows (HL) ### Downtrend - Lower Highs (LH) - Lower Lows (LL) ### Sideways/Range - Equal Highs and Lows - Price bouncing between support and resistance ## Support and Resistance ### How to Identify 1. **Previous swing highs/lows** 2. **Areas of price rejection** 3. **Round numbers** 4. **Volume clusters** ### Trading S/R - Support becomes resistance when broken - Resistance becomes support when broken - Multiple touches = stronger level ## Market Psychology ### What Drives Price - **Fear**: Creates selling pressure, panic - **Greed**: Creates buying pressure, FOMO - **Uncertainty**: Creates consolidation, indecision ### Reading the Crowd - Long wicks = rejection of prices - Small bodies = indecision - Large bodies = conviction ## Practical Application 1. Start with higher timeframes (Daily/Weekly) 2. Identify trend direction 3. Mark key S/R levels 4. Wait for candlestick confirmation at levels 5. Enter with defined risk --- *Practice on charts daily. Pattern recognition improves with experience.*