Price action

Price action is reading price itself on the chart. Instead of tools derived from price, like moving averages or RSI, you look at candles, highs and lows, levels, and what price does at those levels.

The logic is simple. Every indicator is calculated from price, so it arrives a step behind it. Read price directly and you get the information first-hand. That doesn't mean banning indicators; it means not making them your main source.

Every candle is a record of what happened between buyers and sellers in that period. The body shows who won, the wick shows who tried and couldn't hold. Price action reads those records together, in sequence and in the place where they form.

Price action isn't a strategy, it's a way of reading. Support and resistance, trend structure, candlestick patterns, breakouts and retests are all part of it. Every VerTrader puzzle asks for the same thing: you look at the chart and say Buy, Sell or Wait.

With three questions. First, structure: are highs and lows rising, falling, or is price moving sideways in a range? Second, location: is price at a clear level right now, or between two levels? Third, reaction: what are the candles doing at that level, and where do they close?

An example. Gold has turned back from around 2,400 dollars twice before. Price climbs to 2,400 again. Candles wick up to 2,408 but close between 2,392 and 2,397. Those upper wicks show buyers trying to push price above the level and sellers taking it back.

A plan comes out of that reading. If the level holds, a sell idea makes sense, with the stop above the wicks at 2,410. Entry at 2,395 means 15 dollars of risk, 1R. The target is the previous low, say 2,350: 45 dollars, 3R. If price closes above 2,410, the level has broken and the idea is over.

The three questions are the same at every level; only the answers change. If structure, location and reaction don't point the same way, the reading isn't clear, and then Wait is a decision too.

Memorising patterns. Hammer, engulfing, pin bar: the names are easy to learn. But the same hammer says something at support and nothing in the middle of a range. In price action a candle's meaning comes from where it stands, not from its name.

Looking for a story in every candle. On small timeframes, interpreting every twitch means mistaking noise for signal. Do your reading at clear levels and skip the candles in between. There's little to say in the middle between two levels.

Not waiting for the close. Spot a long wick while the candle is still open, enter, and the wick can turn into a body before the close. What's on the screen is an unfinished candle. In price action, decisions are made on closed candles.

And reading the chart the way you want it to be. With a direction already in mind, every candle seems to confirm it. Drawing your levels and writing down what price would have to do to prove you wrong, before you look for a trade, reduces that trap.

It's subjective. Two traders can draw different levels on the same chart and read the same wick differently. The way to reduce that is to write rules: how many touches make a level, which close you wait for, where the stop goes.

Around news, price ignores levels for a while. When major data hits, candles cut through levels and wicks lose their meaning. A reading done without checking the economic calendar is incomplete.

In thin markets and quiet hours, candles form on little trading. A wick there may reflect one large order rather than a real fight between buyers and sellers.

Even the cleanest reading doesn't know the outcome. Price action helps you weigh probabilities; it doesn't guarantee direction. That's why every reading comes with a stop.