What is price action?

Price action is the movement of a security's price plotted over time. Price action forms the basis for all technical analyses of a stock, commodity or other asset charts. Many short-term traders rely exclusively on price action and the formations and trends extrapolated from it to make trading decisions.

How do you interpret price action?

Interpreting price action is very subjective. It's common for two traders to arrive at different conclusions when analyzing the same price action. One trader may see a bearish downtrend and another might believe that the price action shows a potential near-term turnaround.

What does a price action trader look for?

Typically, price action traders primarily consider the price movements of the past 3-6 months while slightly focusing on the price movements before that period. Besides the price and duration, these traders consider the security’s trading volume. They do not utilize the various technical analysis indicators to predict the price.

Is price action a technical analysis?

Thus, price action is a form a technical analysis, but what differentiates it from most forms of technical analysis is that its main focus is on the relationship of a market’s current price to its past or recent prices, as opposed to ‘second-hand’ values that are derived from that price history.