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TRADING GLOSSARY

Price action: reading the market without indicators

Price action trading is the practice of making trading decisions based solely on price movements, without relying on lagging indicators. Price action traders read candlestick patterns, chart structure, and support/resistance levels to understand what the market is doing and where it is likely to go next.

Why price action works

All indicators are derived from price. Moving averages are smoothed price. RSI is a calculation of price changes. MACD is the difference between two moving averages of price. By reading price directly, price action traders access information in its purest form without the lag inherent in indicators.

Key candlestick patterns

Pin bar (hammer/shooting star): A candle with a small body and a long wick that signifies rejection of a price level. A pin bar at support (long lower wick) suggests buyers stepped in. A pin bar at resistance (long upper wick) suggests sellers are defending the level.

Engulfing patterns: A two-candle pattern where the second candle’s body completely engulfs the first. A bullish engulfing at support suggests a reversal higher. A bearish engulfing at resistance suggests a reversal lower.

Inside bar: A candle whose range is completely within the previous candle’s range. It represents consolidation and often precedes a breakout.

Chart structure

Beyond individual candles, price action traders read the overall structure of the chart: higher highs and higher lows define an uptrend; lower highs and lower lows define a downtrend. Support and resistance levels are price zones where the market has repeatedly reversed. The interaction between price and these levels is the core of price action analysis.

AskTrade’s Technical Analysis Agent identifies all major price action patterns and chart structures automatically, combining them with complementary indicator analysis for maximum accuracy.

Disclaimer: This is for educational purposes only and does not constitute financial advice. Trading involves significant risk of loss.