Understand Price Action in 10 Minutes

In the trading market, the analysis methods that everyone is familiar with are nothing more than fundamental analysis and technical analysis. Some will combine the two and use fundamentals plus technical aspects to comprehensively analyze the market. We have talked about a lot of technical indicators before. If you understand the technical indicators, you will know that the relationship between technical indicators and price trends is like the relationship between a shadow and a person. When you want to understand what this person is doing through shadows, you will lose a lot of information. Therefore, many traders will choose to observe people directly and obtain market information directly through prices. This is what we are going to talk about today.Forex tradingofprice action。

In recent years, more and more traders have gradually begun to come into contact with price behavior in addition to fundamental analysis and technical analysis, and have invested in the study of price behavior.

So the first question, what is price action?

Price action is called price action in foreign countries. Many people’s understanding of the trading method of price action is naked K support and resistance, which is the shooting star line and plumb line we are talking about. The concepts and tools used are all different, and the strategies are also diverse.

Today we will put aside the market definition of price action and let me talk about my understanding of price action from my own perspective.

Whether it is the stock market, futures market, Forex market or digital currency market, in fact, there is a chain behind the price trend of every market and every bottom.

First, each market will have its own fundamental information, and then funds will participate in the market. All funds must participate in market transactions through orders.

Orders follow certain rules in the exchange and undergo complex operations to form a changing price that keeps rising and falling.

We then draw the price into a candlestick according to fixed rules, forming the candlestick chart we see. Then, based on price, various technical indicators were obtained through various formula calculations.

When you understand that there is such a chain behind the price trend, you can see that the fundamentals are at the front of the chain, and the technical indicators are at the end of the chain. The fundamental analysis and technical analysis we usually talk about are actually analysis methods at both ends of the entire chain.

Our transactions in the market are nothing more than two directions of long and short, as well as two actions of buying and selling. Whether we are analyzing or trading in the market, one thing that everyone must do is to obtain information, process the information, and then output the results. No matter whether the subsequent output results are long or short or wait and see, the process of obtaining information is indispensable in the front. It's just that everyone's way of obtaining information and the information they pay attention to are different. Some people pay attention to the development of the industry, some people pay attention to the company's performance, some people pay attention to the hot spots in the news, some people pay attention to the MACD indicator, and some people pay attention to the slope of the moving average. From fundamentals to technical indicators, every link in the entire chain will generate information, and then different traders will obtain information from this chain, process the information, and then make trading decisions based on their own understanding of the market.

If you understand this process, then look back at fundamental analysis and technical analysis. What is the core of distinguishing these analysis methods? In fact, it depends on which link in the chain you get the information from. If you study the development of the industry, study the company's financial data, and obtain information through fundamental links as the basis for analysis and decision-making, then you are doing fundamental analysis. If you study the slope of the moving average and the energy column of MACD, and obtain information on technical indicators as the basis for analysis and decision-making, then you are doing technical analysis.

What is price action analysis?

If you can understand the difference between fundamental and technical analysis, then price action is easy to understand. My understanding of price action is the analysis method of obtaining market information directly through price. The fundamentals of a bid will affect the properties of the funds involved. A bid with intrinsic value will have more investment funds, and a bid that exists for risk hedging will have more speculative funds. Funds participate in the market through orders. The status of the orders directly affects the rise and fall of prices. Therefore, the rise and fall of prices is the most direct result we can observe after the operation of funds. Price behavior is a way to obtain market information and make analysis and decisions by directly observing price trends.

To sum up briefly, when you see the chain behind the price trend, the division of different analysis methods essentially depends on which link of the chain you go to obtain information.

Price behavior is a method of obtaining information and analyzing the market directly through prices. As for whether we observe the rising and falling bands or the candlestick, we study the candlestick pattern or the support and resistance.

As long as the market information is obtained directly through price, it is price behavior. However, different indicators and different strategies will be used in technical terms, and price behavior will also have different analysis methods and different analysis tools.