Saturday, February 1st, 2014 by Tim Lanoue
Understanding the fundamentals and complexities of day trading takes time and commitment which is why today we are going to scratch the surface of one of the most complex topics associated with day trading. Price action is the root of any asset and its movement determines whether your trade prediction ends up as a win or loss. Having a slight understanding of candlestick charting, trends, and time frames is what price action is all about. Moving forward we will cover the basics associated with price action and online trading.
What is Price Action?
Price action is a term designated for online trading that means the summation of all buy and sell orders at any given moment of time. Price action can last as little as a second or can be infinite since time is continuous. To further explain this, all the buy and sell orders that occur in the market place dictate price action, it simply the assets movement over any period of time. In the picture below you can see an example of price action.
What is Candlestick Charting?
Candlestick charting is simply a chart style chosen by a majority of traders because it symbolizes the opening, duration, and closing of a candle. This style of charting is very popular among Forex and binary options because it allows traders to determine how the asset is performing and approximately when the candle is about to close/open. In the picture below you can see an example how our candlesticks look.
The opening of the candle is wear it starts whereas the closing is where it ends. There are two types of candles associated with candlestick charting. The first type of candle is a bearish candle, meaning that the direction that the candle is moving is downward. The last type of candle that can be seen is a bullish candle, it displays an upward movement.
What are Price Action Trends?
Price action trends are trends that occur throughout an assets market hours. There are three types of trends associated with price action, the first being a bullish trend. A bullish trend is characterized by a strong upward movement throughout an assets overall trend, an example can be seen below.
The second type of trend commonly seen with price action would be a bearish trend. A bearish trend is an asset that displays a strong downward movement unlike a bullish trend. The last type of trend that can be seen would be a neutral trend, meaning that there is no clear upward or downward direction associated with the assets trend. In the picture below you can see an example of both trends.
Understanding the basics of price action is essential if you want to become a successful trader. Without the practical knowledge of price action it is nearly impossible for traders to properly implement strategies that involve the use of indicators or advance trend trading. This is the root and basis that all strategies are built around, if you have any questions please feel free to leave a comment below. For more information on Candlestick charting you can visit the Binary Candlesticks Charts Guide!
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