Price Action (PA), in the most traditional manner, is the analysis of price movement. This is usually the analysis of price without the use of any mathematical or technical indicators. In other words, Price Action should be represented purely by the movement in the price of a security.

Price Action is usually analysed through Price Charts. The uses of price charts are common in financial markets where the movement of securities is observed using the price Bars (also known as OHLC Bars) or Candlesticks. Price can be analysed for different time periods as well.

Japanese Candlesticks analysis, Price Patterns as well as Swing Highs/Lows are other forms price action analysis. This is because all the above analysis place great focus on price movements only.

Although many traders know about PA and they admit that it is important, unfortunately, what surprises me still is that some novice traders will jump into a trade as soon as they see a low test bar or Doji bar without really understanding what the price is telling them.

Novice traders do not realise that there are patterns within patterns and, unless you understand the overall story, some patterns can be deemed meaningless. What many don’t realise is that every bar has a story. These stories that I’m talking about are stories of war – the war between the buyer and sellers. Without going into too much detail, the goal of each story is to identify the winner of these wars as the winner who will control the market, as opposed to simply spotting the patterns.