What is Price Action Trading: Guide and Examples

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Price action in trading is one of the most basic terms and among the first you will learn once you embark on your investing journey. So, what is price action? The price action definition is fairly simple and, as per Investopedia, states that it's "the movement of a security's price plotted over time".

Price action explained in layman's terms is just the up and down movement of the price of a given security over a certain period of time. As you will see in our price action guide here, this is what any technical analysis is based on and what you need to have at hand to make any conclusions or decisions in trading.

In fact, price action technical analysis is very often the only type of analysis many traders rely on in the short-term. But in addition to that, we need this fundamental part of trading in order to make informed long-term trading decisions as well, and be able to extrapolate future trends. Then once you learn to do that, you will learn how to use price action for more complex technical analysis tools.

For instance, candlestick charts and patterns are a common way to employ your price action strategy. These are convenient visual interpretations of price action that can, among other things, help you spot trends, interpret reversals and determine breakouts.

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