Another Traders Introduction To Price Action Analysis


While we tend to be a bit prejudiced about our thoughts on price action trading, we still try and keep an open mind as to how others are using price action in their day trading.  Following that line of thinking, here is another traders introduction to price action analysis.  It’s doubtful you will get the exact same description of what price action trading is really all about from any two people, so we normally tell people that there is no definitive answer that truly describes price action trading.

Price Action Trading

Price Action Trading (

The bottom line is that trading price action involves the skill of learning to read prices as they print to a chart (usually without indicators), while recognizing the overall general direction of the trend.  The key in our opinion is to also be able to spot the patterns during corrections so that you are able to enter the market at the most opportune time, which is just as the correction is ending and prices are turning back with the general trend again.  This is a skill that can be honed to be very accurate!

While we like what this article has to say, we don’t agree about watching many different time frames.  If you learn to trade a naked chart, in time you will learn to see everything that you need on a single time frame chart.  I have actually learned to see higher time frames and lower time frames on my single 2000 tick trading chart when trading the ES.  It’s a skill, but like any skill, it takes time to learn and it doesn’t come to most people over night.  Do you think that Peyton Manning learned to read pro defenses over night?  No, he had years of experience starting in grade school of playing the position of quarterback.  Trading is no different.  If you are going up against professional traders every day, then you are going to need to be at the top of your game.

Here is what Todd Mitchell of Trading Concepts had to say in a recent article we found posted at

Modern day trading systems use multidisciplinary approaches to determine appropriate trading setups and to gain an overall understanding of the mood of a given days trading session. At the heart of many trading systems is price action analysis, which is interpreted in a variety of styles and approaches that best suit the particular traders methodology. Price action analysis has always been an important facet in understanding intra-day trading and short-term trading trends. In some trading systems it is the primary component in determining trade selection, and in others it plays a secondary or filtering role in determining trade selection. To be sure, there are well-known trading systems that utilize only price action analysis and eschew oscillators, indicators and all the other modern day mathematically based trading tools.

Traders who utilize price action analysis generally do so by utilizing multiple time frames to determine short and intermediate term trends. Four common time frames used in these comparisons are weekly, daily, 60 minute, and 30 minute intervals. Shorter time frames generally distort the results of analysis because they over emphasize less important price action relative to the overall trend of reference needed in determining trade set-ups and overall trend analysis. It is not unusual for position traders to utilize the 30 and 60 minute charts to spot trade setups that are not readily apparent on the longer-term charts.

In its simplest form, price action analysis involves examining the open, high, low, and close of individual price bars, sometimes called vertical bars. This analysis can be either single bar analysis, duel bar analysis, or multiple bar analysis. The traders choice of time period and the number of bars is strictly a matter of choice relative to his or her trading style. Important information can be gleaned from in a examining vertical bars and a variety of typology prime systems has evolved to identify the predictive nature of single and dual bar systems. Like all trading analysis, the purpose of analyzing verticals bars is to develop predictive characteristics that can be used in determining trade selection. Most systems using price action analysis have specific nomenclature for vertical bars that are bullish, bearish, and neutral.  You can read the original article here.

As Todd says, there are often many different naming conventions for some of the same price action trading properties, but for the most part, they are all looking at things in the same way and finding the same dependable price action patterns.  Regardless of what you call it, most all profitable traders use some form of price action to trade, even if they don’t say so or even realize it.  If you can’t read a price chart, it’s almost impossible to make money as a day trader.

While most traders are busy trying to find the holy grail in trading, all they really need to do is learn to read a price chart in order to break the losing habit in trading.  It’s not easy and it takes time and effort, like anything else does that is worth pursuing.

We hope you enjoyed reading about another Traders Introduction To Price Action Analysis.  If you would like to learn how to become a price action day trader, then you need to spend some time on our website exploring our price action trading course that is located at