“Trade what you see, not what you think”. As a trader, you need to drill one thing in mind – Price Action is King! 

What’s that you ask? Let’s discuss…

Price action trading is a methodology that relies on historical prices (open, high, low, and close) to help you make better trading decisions. Price action tells you what the market IS DOING, and NOT what you think it should do.

If a stock price begins climbing, it shows that investors are buying because prices rise as traders buy. They then assess the price action based on the aggressiveness of buying; the historical charts; and real-time price information such as bids, offers, volume, velocity, and magnitude.

The majority of trading indicators (like Moving Average, RSI, Stochastic, ADX, ATR, Bollinger Bands, etc) are a derivative of price. This means the line (or value) you see on your indicator is derived by applying a mathematical formula to the price.

Now, what if your RSI indicator is overbought and the Stochastic indicator is oversold, at the same time? Won’t you have conflicting signals? Indeed! But no worries! You can adjust the settings of your RSI indicator and make it oversold, so now, both your RSI and Stochastic indicator are sending out the same “signal”. But instead of manipulating an indicator to fit your bias, you need to look out for what the price is telling you. And then use the indicators as a confirmation of the signal or the trend. 

And this when you’ll have absolute CONTROL over your trading results. You make decisions like where you’ll enter the trade, set your stop-loss, or exit your winners. You’ll know how much to risk and what is the market condition you’re trading. 

And the beauty of it is that you’ll have total control of your actions, you can make tweaks and improvements to your trading. And you can end up booking more profits in the long run.

Now, what are the price action terminologies you need to get familiar with?

Low – 

Previous Close

Previous Open

Previous High

Previous Low

High

Prev N

Trade At Price

Pivot Points

Opening Range

Narrow Range

Nth Candle

Number

Close

Open

Happy Trading! 😄