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    Price Action

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    Navneet Sharma Sharma
    The document discusses key concepts in price action analysis including trends, support and resistance, breakouts, and volume analysis. It notes that trends are determined by time and slope. Institutions dictate market trends through large orders that can manipulate prices. Support and resistance levels are identified as price zones where the price hesitates to move further or sees sharp reversals. Breakouts occur when the price moves outside support or resistance with increased volume, potentially signaling a trend. Volume analysis is also important, with high volumes confirming trends and low volumes indicating retail participation.

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    Price Action

    Uploaded by

    Navneet Sharma Sharma
    51 views12 pages
    The document discusses key concepts in price action analysis including trends, support and resistance, breakouts, and volume analysis. It notes that trends are determined by time and slope. Institutions dictate market trends through large orders that can manipulate prices. Support and resistance levels are identified as price zones where the price hesitates to move further or sees sharp reversals. Breakouts occur when the price moves outside support or resistance with increased volume, potentially signaling a trend. Volume analysis is also important, with high volumes confirming trends and low volumes indicating retail participation.

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    The document discusses key concepts in price action analysis including trends, support and resistance, breakouts, and volume analysis. It notes that trends are determined by time and slope. Institutions dictate market trends through large orders that can manipulate prices. Support and resistance levels are identified as price zones where the price hesitates to move further or sees sharp reversals. Breakouts occur when the price moves outside support or resistance with increased volume, potentially signaling a trend. Volume analysis is also important, with high volumes confirming trends and low volumes indicating retail participation.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    51 views12 pages

    Price Action

    Uploaded by

    Navneet Sharma Sharma
    The document discusses key concepts in price action analysis including trends, support and resistance, breakouts, and volume analysis. It notes that trends are determined by time and slope. Institutions dictate market trends through large orders that can manipulate prices. Support and resistance levels are identified as price zones where the price hesitates to move further or sees sharp reversals. Breakouts occur when the price moves outside support or resistance with increased volume, potentially signaling a trend. Volume analysis is also important, with high volumes confirming trends and low volumes indicating retail participation.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 12

    PRICE ACTION

    INTRODUCTION

    • Price action is used to analyze trends and identify entry


    and exit points when trading. Many traders use candlestick
    charts to plot prior price action, then plot potential
    breakout and revering patterns.
    TRENDS
    STRENGTH OF A TREND

    The strength of a trend is determined by :


    • TIME :
    • SLOPE
    WHO DECIDES THE PRICE ?
    INSTITUTIONS

    • The trends in the markets are dictated by the institutions since they have
    larger amounts of capital and are able to place orders in high volumes.
    • Institutional money is referred to as “smart money”. It is perceived that ‘smart
    money’ always makes wiser moves in the market than retail traders. Hence
    following the smart money seems like a wise idea.
    • Order quantities are placed to MANIPULATE the prices which are favourable
    for their positions.
    SUPPORT AND RESISTANCE
    HOW TO DRAW SUPPORTS AND
    RESISTANCES ?

    A price action zone can be described as ‘sticky points’ on the chart where the
    price has displayed at least one of the behaviours:
    a. Hesitated to move up further after a brief up move
    b. Hesitated to move down further after a brief down move
    c. Sharp reversals at a particular price point
    BREAKOUTS

    • A breakout is a stock price moving outside a


    defined support or resistance level with increased volume. A breakout trader
    enters a long position after the stock price breaks above resistance or enters
    a short position after the stock breaks below support. Once the stock trades
    beyond the price barrier, volatility tends to increase and prices usually trend in
    the breakout's direction. The reason breakouts are such an important trading
    strategy is because these setups are the starting point for future volatility
    increases, large price swings and, in many circumstances, major price trends.
    • A resistance becomes a support after a complete breakout.
    VOLUMES

    • Also, looking at the volume is important before placing your order. If there is
    no rise in the volume when the breakout happens, then the price action trader
    should be doubtful in taking that position.
    • A trend reversal should always be supported by an increase in volume.
    VOLUME ANALYSIS

    • When institutional investors buy or sell, they obviously do not transact in small
    chunks.
    1. Volumes are used to confirm a trend
    2. The end of day volumes indicates the cumulative volume across trades executed
    throughout the day
    3. High volumes indicate the presence of smart money whereas low volumes indicate
    retail participation
    4. When you initiate a trade to either go long or short always make sure if volumes
    confirm
    5. Avoid trading on low volume days

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