Price Action Trading
5paisa Research Team
Last Updated: 02 Jun, 2025 05:37 PM IST
Content
Price action trading is a popular strategy that focuses on analysing a security’s price movements over time. Instead of relying on indicators or complex formulas, traders use charts and patterns to make informed decisions. It helps identify key levels like support and resistance, allowing traders to enter or exit trades based on real-time market behaviour. This approach is widely used in short-term trading.
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Frequently Asked Questions
Price action trading primarily focuses on price movements without relying heavily on indicators. However, some traders use simple tools like moving averages or volume to support their analysis, though these are secondary to the actual price patterns.
Common price action patterns include pin bars, inside bars, engulfing candles, and head and shoulders. These formations help traders identify potential trend reversals, breakouts, or continuation signals based on how price behaves around key levels.
No trading strategy, including price action, guarantees profits. While it can offer high-probability setups, market conditions, trader skill, and risk management all influence success. It's important to combine analysis with discipline and proper risk control.
Traders use price patterns near support or resistance levels to identify entries. Exits are based on targets near the next key level or price confirmation. Stop-losses are set just beyond the pattern to manage risk.