What is Price Action Trading?

Price action trading (P.A.T.) is a trading strategy that uses price movements to determine potential market movements. It's a form of technical analysis that totally focuses on price history and ignores fundamental factors.

Since it ignores the fundamental analysis factors and focuses more on recent and past price movement, price action trading strategy depends on technical analysis tools.

Tools used for Price Action Trading?

Market Structure:

The first thing that a Price Action Trader should see is the market structure, i.e. which stage the market is in. The market structure consists of 4 Phases:

1. Accumulation Phase / Consolidation
2. Advancing Phase / Uptrend
3. Distribution Phase / Consolidation
4. Declining Phase / Downtrend

Support & Resistance:

If the market is in an Advancing Phase or Uptrend, We can initiate long positions (Buy). if the market is in a Declining phase or Downtrend, We can initiate short positions (Sell)

After making this decision, We need to analyze the support and resistance levels, But why ?? Because we have seen the highest Buying & Selling Pressure in these zones

Support or Demand is a zone where buyers start buying and push the price higher, whereas resistance is a zone where sellers start selling and push the price lower.

Entry - Exit - Stop Loss

1. See, as a Price Action Trader, we have to use the Price Action Concept to determine the Entry-Exit-SL Point
2. As per my personal experience, I mainly focus on Fresh Highs and Fresh Lows for Long and Short Entries
3. I also focus on Yesterday's Close, High, and Low to determine whether the Market Sentiment is Bullish or Bearish
4. I generally plan Long Entries on Fresh High/Close above Yesterday's High/Close
5. As well as Short Entries on Fresh Low/Close above Yesterday's Low/Close
6. But, we have to wait for a little Retracement, because we can't take entry without identifying the SL level.
7. Stop Loss is always should be the Last Swing High/Low as per which Time Frame you select
8. And For Target, I generally find the Space available in the Market, and how much it can move. Then check R: R

Breakout & Reversal

Now let's understand the Setup in Details...

Breakout Trading: In Breakout trading, we focus on Breakouts. Like, Resistance Breakout, Support Breakout, Day High or Day Low Breakout, Yesterday's High or Low Breakout, Swing High or Low Breakout, Big Player Footprint Breakout, any Breakout we feel safe and backed by Smart Money or Big Funds...

Things to remember: Before trade Breakouts, we have to understand if it is backed by Smart Money or to Trap Retail traders as a False Breakout. To understand this, we use various kinds of tools, like Volume, Candlestick Strength, Trend Strength, Open Interest, Proper Price Action, etc... If everything is in line with us, we can plan our trade on Fresh High/Close as we discussed earlier

Reversal Trading: In Reversal trading, we focus on Reversal. Like a Reversal from any Strong Support or Resistance, any Demand or Supply Zone, Reversal from Today's High or Low, Reversal from Yesterday's High/Low/Close, From any Swing High or Low, any  Reversal we feel safe and backed by Smart Money or Big Funds...

Things to remember: Before trade Reversals, we have to understand if it is backed by Smart Money otherwise, Price can go Sideways/ Range Bound. To understand this, we use various kinds of tools, like Volume Profile, Fibonacci, Candlestick Strength, Trend Strength, Open Interest, Proper Price Action, "W" or "M" or "U" Patterns, "Double Bottom" or "Double Top" Patterns, etc... If everything is in line with us, we can plan our trade on Fresh High/Close as we discussed earlier

Happy Trading and Investing!

Disclaimer: The above article is based on my personal knowledge & experiences only for sharing with those who want to learn something. Not to give any Trading Advice or Tips. I am not a SEBI Registered Analyst. I never provide any Tips, Paid Calls, Recommendations, Assurance, Guaranteed Services, etc. I only charge for my Mentorship Program. Please consult with your Registered Financial Advisor before doing anything in the Stock Market. I am not liable for any Profit or Losses