What is Price Action?

Price action is a trading strategy that attempts to predict future price movements in financial markets based on past movements of asset prices. Price action is a part of technical analysis and is based on the study of price charts, volume and price movements. Essentially, price action strategy involves trading by monitoring price movements and identifying chart patterns.


The basic principles of price action strategy are:


1. **Reviewing Price Charts:**
Price action strategy focuses on understanding the dynamics of buyers and sellers in the market by examining the charts of asset prices. Various types of charts are used for this, especially candlestick charts and bar charts.


2. **Pattern Description:**
Price action strategy is based on recognizing certain patterns on price charts. These patterns can include various price movements such as trends, support and resistance levels, price reversal formations, etc.


3. **Monitoring Trends:**
Price action strategy assumes that asset prices move in a certain trend. Therefore, identifying and tracking trends is an important part of trading strategy.

4. **Support and Resistance Levels:**
Price action strategy recognizes that certain levels on price charts act as support or resistance. These levels mark points where prices may pause or reverse at a certain level.


5. **Volume Analysis:**
Price action strategy also takes into account the relationship of volume to price movements. High volume price movements can indicate that the market is moving strongly, while low volume movements can often reflect weak market participation.


Price action strategy is based on the basic principles of technical analysis and is often used in conjunction with other technical analysis tools. Traders who implement this strategy avoid emotional reactions and adopt an objective approach when making trading decisions based on price.

movements. However, the success rate of the price action strategy depends on the trader's skill, experience and correct interpretation of market conditions.


The advantages and disadvantages of the price action strategy are as follows:

**Advantages:**


1. **Simplicity:**
Price action strategy does not involve complex indicators or calculations. Therefore, it can be easily understood and implemented by beginners and experienced traders.


2. **Flexibility:**
Price action strategy can be used on any asset class or time frame. This adapts to different market conditions and traders' preferences.


3. **Reliability:**
Because it is a strategy based on price movements, price action can generally provide more reliable results than other technical analysis tools. This is based on the real dynamics of the market.

4. **Instant Reaction:**
Price action strategy provides the ability to react quickly to instant market movements. This allows traders to make quick decisions and take advantage of instant opportunities.


**Disadvantages:**


1. **Requires Experience:**
In order for the price action strategy to be implemented effectively, traders must be able to correctly interpret price charts and recognize patterns. This also requires experience.


2. **Information on the subject:**
Price action strategy does not take into account the fundamental factors that affect price movements. Therefore, it is important for traders to have sufficient knowledge of fundamental analysis as well.

3. **Emotional Effects:**
Since it is a strategy based on price movements, traders can sometimes act with emotional reactions. This can make it difficult to make objective decisions.


4. **Inadequacy of Technical Analysis Tools:**
Price action strategy is limited compared to other technical analysis tools. Therefore, in some cases it may be necessary to use additional indicators or analysis tools.


3. **Emotional Effects:**
Since it is a strategy based on price movements, traders can sometimes act with emotional reactions. This can make it difficult to make objective decisions.


4. **Inadequacy of Technical Analysis Tools:**
Price action strategy is limited compared to other technical analysis tools. Therefore, in some cases it may be necessary to use additional indicators or analysis tools.


Price action strategy is a fundamental part of technical analysis and is a powerful trading approach used by many traders. However, like any trading strategy, it has its advantages and disadvantages and may not be suitable for every trader.