What is Price Action?
Price Action (PA) trading means making decisions based solely on the movement of price on a chart. Instead of using indicators like RSI or MACD, a price action trader reads candlestick patterns, support/resistance zones, trendlines and market structure to determine where price is likely to go next.
Price action is the foundation that all indicators are built on — because indicators are just mathematical formulas derived from price. By studying price directly, you skip the lag and read the market in real time.
Market Structure & Trends
The first step in price action is understanding market structure — the pattern of highs and lows that define a trend.
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Uptrend: Series of Higher Highs (HH) and Higher Lows (HL) — price is making new peaks and retracing less each time
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Downtrend: Series of Lower Lows (LL) and Lower Highs (LH) — price is making new lows and bouncing less each time
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Range / Consolidation: Price is bouncing between equal highs and equal lows — no clear trend direction
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Break of Structure (BOS): When price breaks a significant high or low, the trend may be changing
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Change of Character (CHoCH): First sign that the market is shifting from one trend to another
Pro Tip: Always identify the trend on the Higher Timeframe (H4, Daily) BEFORE looking for entries on the lower timeframe (H1, M15). Trading with the trend dramatically improves your win rate.
Trendlines & Channels
Trendlines are diagonal lines drawn across swing highs or swing lows to visualise the direction and strength of a trend.
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Bullish Trendline: Drawn by connecting at least 2 Higher Lows — acts as dynamic support in an uptrend
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Bearish Trendline: Drawn by connecting at least 2 Lower Highs — acts as dynamic resistance in a downtrend
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Channels: Parallel trendlines containing price — buy at the lower channel, sell at the upper channel
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Trendline Break: When price breaks and closes outside the trendline with conviction — suggests trend change
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Valid trendlines need at least 3 touches — the more touches, the stronger the line
Key Price Action Patterns
These are the most powerful and commonly used price action setups:
| Pattern |
Bias |
Signal Strength |
Best Timeframe |
| Pin Bar (Hammer/Shooting Star) |
Reversal |
⭐⭐⭐⭐⭐ |
H1, H4, Daily |
| Bullish/Bearish Engulfing |
Reversal |
⭐⭐⭐⭐ |
H4, Daily |
| Inside Bar |
Continuation/Reversal |
⭐⭐⭐ |
H4, Daily |
| Outside Bar (Motherbar) |
Reversal |
⭐⭐⭐ |
H4, Daily |
| Double Top / Double Bottom |
Reversal |
⭐⭐⭐⭐ |
H4, Daily, Weekly |
| Fakey (False Break) |
Reversal |
⭐⭐⭐⭐ |
H1, H4 |
The Pin Bar — Most Powerful PA Signal
A Pin Bar is a single candlestick with a very long wick (tail) and a small body. It signals that price was rejected hard from a level.
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Bullish Pin Bar: Long lower wick, small body at the top — buyers pushed price strongly back up. Look for these at support zones.
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Bearish Pin Bar: Long upper wick, small body at the bottom — sellers rejected price from a resistance zone.
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Entry: Enter on the close of the pin bar candle, or on a pullback to 50% of the pin bar
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Stop Loss: Place SL just beyond the tip of the wick (the extreme of rejection)
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Best location: Pin bars at key support/resistance, trendlines, or Fibonacci levels carry much more weight
Pro Tip: A pin bar is MUCH more reliable when it forms at a key level (major S/R, round number, previous swing high/low) than when it appears in the middle of nowhere. Location is everything.
How to Build a Price Action Trading Plan
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Step 1 — Higher Timeframe Bias: Open Weekly/Daily chart. Is price in an uptrend, downtrend, or range?
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Step 2 — Key Levels: Mark all major support and resistance zones on the Daily and H4
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Step 3 — Wait for Price to Reach a Level: Do not force entries — let price come to your level
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Step 4 — Look for a Confirmation Signal: Pin bar, engulfing, or inside bar at the level
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Step 5 — Enter with a Defined Risk: Calculate your lot size so that your SL = max 1-2% of account
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Step 6 — Set TP at next key level: Minimum R:R should be 1.5:1 before taking the trade
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Step 7 — Manage the trade: Move SL to breakeven once price moves 1R in your favour