The Ultimate Price Action Trading Guide for Smarter Trade Entries

Price action trading is the key to mastering the market structure and making confident trade decisions.

Struggling to spot key levels?

Learn how to read price movements, identify high-probability entries, and improve your trading strategy.

This guide simplifies price action trading so you can trade smarter, not harder.

Price action trading is the foundation of making informed trading decisions. 

Understanding price movement helps traders interpret market trends without relying on indicators. Sometimes we refer to this as trading naked.

This method focuses on the price of a security and its historical patterns to anticipate future price direction.

Why Price Action Trading Matters

• Traders focus on price to make real-time decisions.
• It relies on analysing price action data without complex indicators.
• Recognising price action patterns helps traders anticipate potential breakouts since the price action reveals market sentiment.

How to Read Price Action in Trading

Price action refers to the fluctuation in the market value of a financial asset over a certain period. 

Traders analyse price history, recent price changes, and prior price action to forecast market trends. 

By studying price action on any time scale, they gain a sense of a market’s price direction.

Key factors in price action analysis:

1. Support and Resistance Levels – Traders use price action to identify key trading levels where the price may reverse.
2. Candlestick Patterns – Price action traders analyse candlestick formations to interpret market sentiment.
3. Trendlines and Channels – These help traders visualise price movements and assess trading with the trend.
4. Volume Analysis – The volume of trading confirms price action signals and market momentum.

Types of Price Action: Trends and Consolidation

Price action traders classify market movements into three major categories:

1. Uptrend (Bullish Price Action)

• The price moves in a series of higher highs and higher lows.
• Indicates strong buying momentum and potential future price increases.
• Traders use trend-following strategies to ride the movement of a security’s price.

As an example, Gold is trading in a strong uptrend.

2. Downtrend (Bearish Price Action)

• The price forms lower highs and lower lows.
• Suggests sellers are in control and price may continue to decline.
• Price action traders look for bearish signals such as resistance rejections or trendline breaks.

As an example, AUDJPY is trading in a downtrend channel after topping out last week.

3. Sideways/Consolidation

• The price moves within a defined range, creating support and resistance levels.
• Traders focus on price breakout patterns and key levels for entry points.
• Often signals accumulation before a breakout since the price action builds up momentum.

As an example, Bitcoin is trading in a decent sideway consolidation.

Price Action Trading Strategies for Smarter Decisions

Price action trading involves making trading decisions based on recent and actual price movements. Several price action strategies help traders navigate different market conditions.

1. Pin Bar Reversal

• Indicates a potential breakout since the price reacts sharply at a key level.
• A long wick suggests rejection of a particular price level, hinting at a future price shift.

2. Inside Bar Breakout

• Price action traders rely on price consolidation before a breakout.
• A small candlestick within a larger one signals potential price moves.

3. Trend Following with Price Action

• Trading with the trend is a fundamental price action strategy.
• Traders focus on price swings, higher highs, and lower lows to determine momentum.

4. Support and Resistance Rejections

• Traders analyse price action on any time scale to identify high-probability setups.
• If the price breaks key support or resistance levels, it signals a strong directional intent.

How to Analyse Price Action on Charts

Interpreting price action requires visualising price movements on a price action chart. Traders analyse candlestick formations, prior price action, and volume of trading.

Steps to analyse price action effectively:

1. Observe price changes over multiple time frames.
2. Identify recurring price patterns.
3. Analyse volume alongside price movement for confirmation.
4. Use trendlines to map the direction of the price.

Click play on the video below to learn how to identify the market structure correctly on the higher time frame charts.

This introduction to price action trading will help you determine key trading levels for trade entries and profit targets.

Finishing with a specific live chart exercise to cement your learning.

Selecting the Right Broker for Price Action Trading

A reliable broker enhances your ability to use price action efficiently. ACY provides tight spreads, fast execution, and an intuitive platform to analyse price action effectively. 

Who Benefits from Price Action Trading?

• Day Traders – They make trading decisions based on recent price action.
• Swing Traders – They rely on price action patterns to hold trades for days or weeks.
• Scalpers – They analyse price action on any time scale to capitalise on small price changes.
• Institutional Traders – They use price action trading strategies for large-volume trades.

Challenges in Price Action Trading

Price action does not guarantee future price movements. Traders must understand that price action is often subjective. Analysing price action requires experience, discipline, and adaptability.

Price action trading offers traders a way to make informed trading decisions based on price analysis. It is considered ‘the authority’ on price analysis due to its direct market interpretation.

Start analysing price action today with ACY and refine your trading strategies for smarter trade entries.

With ACY, you have access to over 2200 instruments, benefit from lightning-fast execution, and can start your trading journey with as little as $50, choosing between our MT4/MT5 or LogixTrader trading platforms.

Plus, enhance your skills through live weekly trading webinars hosted by our expert team of analysts, or download our latest eBooks here.

Open a live account today and experience the ACY advantage.