Reading Price Action

There are 4 steps to reading price action:

1. Observing how prices moved in the past
2. Observing how prices are moving now, in relation to the past
3. Predicting where prices are not likely to go next
4. Considering the possibilities of where prices may go next

The first two steps require us to interpret the current state of the market:

• Who is in charge of the market right now? The buyers or sellers?
• For how long have they been pushing prices in their direction?
• How strong is the momentum?
• Does the momentum look sustainable?

Based on our answers to these questions, we can estimate where the market price is not likely to move to, in the immediate future.

With those options eliminated, we are finally left with just a few of possibilities of where prices are likely to move to next.

Along with this knowledge, we will be in a much better position to enter and exit our trades with precision.

Let’s give it a go, shall we?

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