Price action is a common term used in trading to refer to the analysis of the movements made by the price of a particular asset or financial instrument in the market.
Although it is included in the technical analysis, the analysis of price action does not use any technical indicator and the forecast of the future price trend is made based on the interpretation given by the trader of the price movement and not by the value shown by an indicator.
Price movements as a time function can be represented in the form of price charts, tables or other graphics. When price charts used other related tool analysis of chart patterns, often included in the analysis of price action, although not all traders agree this classification.
Along with price charts the trader can also use the analysis of chart patterns, often included in the analysis of price action, although not all traders agree on this classification.
The price action could be seen as the measure of price change over time along with the description of price behavior on certain levels such as maximum, minimum, support and resistance. For example, if the price of a stock rises above the peak in the last week and after that keeps registering new daily highs, the trader would conclude that this market is in uptrend.
It is common for advocates of price action analysis to ensure that it is a completely subjective form of market analysis but being, like any other market research approach, an interpretation based on probabilities and personal experience of the analyst, it is very difficult for two traders interpret price action in the same way. It is also quite difficult for both traders get the same results yet having reached the same prognosis.
In other words, the analysis of price action can yield results that differ for each trader who uses it. Although this is quite popular not only because it dispenses with complex technical indicators, but also because it is based precisely on the price behavior to predict the future market behavior.
