Most strategies, regardless of their complexity have some form of chart reading as part of them. This chart reading can come in many forms, all stemming from the price action of the chart. Price action comes in many forms from single-candle formations to multi-candle setups as well. These all have some way of indicating what the price will do next. Apiary Fund reviews a lot of different price action styles both in videos and articles you can read. Here are a few forms of price action and how they can let you know what is going on in the market.
Single-candle price action indications can be readily seen in hammers and shooting stars. These were briefly discussed in the ‘Reversal Trading for Beginners’ article where some of their trading capabilities were discussed. The hammer can be identified by a longer wick on the bottom of the candle with the body being somewhat smaller. The long wick resembles a handle of a hammer with the body resembling the head of the hammer. This typically means a bullish push in the market is coming since the market was being pushed down and it quickly recovers, creating that long wick. The shooting star will be a similar, but flipped. With a long tail on the bull side of the smaller body, the candle somewhat resembles a shooting star, also signaling a fall in the market since the price was driven up and quickly shot down.
Other forms of price action come in support and resistance. This support and resistance can be seen in channels, consolidations, pennants, and more. Support and resistance trading is one of the first things Apiary Fund reviews and is one of the most common trading strategies used by traders. No matter what type of chart pattern you are trading, some form of support and resistance is likely to be used. If not in the entry for the trade, you will see it used for take profits and stop losses frequently like was talked about in the ‘Ideal Price and Time Targets’ article. Breakouts and retracements are highly reliant on this type of price action and the Fibonacci chart tools will commonly reinforce that.
Whenever you are trading, whether you are using indicators or not, you are using some form of price action. All indicators are based on price movement and the course that the candles took over the past set amount of time. If you know how the indicators are calculated and are able to do some of that maths in your head, even approximately, you would be doing so on just the price action. As the most reliable and used way to find out what is going on in trading, price action is one thing all traders should focus on being primarily concerned with before moving onto advanced strategies.