Price action is widely used within the trading community among both technical and fundamental traders. Many technical traders rely heavily on the analysis of price action to inform their trades, market bias, and overall market outlook. Price action takes into account executed market trades, where the volume and spread (price difference between the bid and ask) are taken into consideration.

Traders look for patterns in something called “price action,” which will help them predict future movements. By understanding how to read charts, traders are able to identify these patterns and more accurately anticipate how the market is going to move. Price action analysis can be applied to any available asset type traded in a market, whether it be stocks, currencies, commodities, and other types of financial instruments.

Price action analysis is based on the notion that market prices already incorporate the available information and data. By understanding how to read raw price movements, traders project this knowledge into their trading strategies as a predictive tool for future market activity. It implies analyzing every trading candle without considering any indicator, focusing solely on the movements of the price itself.

In order to understand price action, traders must have a solid foundation in the fundamentals of technical analysis. For example, understanding basic chart patterns and support/resistance is key to implementing an effective price action strategy. Furthermore, traders must have an understanding of candlestick charts, which consists of a body and wicks, to be able to accurately interpret changes in price.

At its core, price action analysis assumes that markets are largely driven by the actions and motivations of market participants. It attempts to identify periods where buyers and sellers either reach a consensus or a stalemate. As such, many traders that rely on price action analysis attempt to identify lingering trends and momentum in the market.

In summary, price action is a forecasting method which involves analyzing market prices of an asset to make predictions of future movements. It is powerful tool used by active traders to identify a variety of trading patterns and market signals. Understanding price action is important for any trader looking to build a reliable trading system, as it is a tool which can provide valuable market insights and provide traders with feedback on their trading systems.