Price Action
Price action is the art of reading what the market is telling you through raw price movement — no indicators, no formulas. Just the relationship between buyers and sellers, visible directly on the chart through candles, structure, and patterns.
Market Structure — The Foundation of Everything
Before patterns or entries, you need to know the trend direction. Market structure is how you determine it — by tracking swing highs and swing lows.
Uptrend market structure (HH / HL)
Break of Structure (BOS)
A Break of Structure happens when price breaks a key swing high (in an uptrend) or swing low (in a downtrend). It confirms the trend is continuing. Many traders use BOS as a trigger to enter in the direction of the trend.
A Change of Character (ChoCh) is when price breaks structure in the opposite direction — a warning that the current trend may be ending. Example: in an uptrend, price failing to make a new high and then breaking the last Higher Low is a ChoCh.
Break of Structure — trend continuation signal
Key Candlestick Patterns
Candlestick patterns alone don't make a trade. They're signals — and they only matter when they appear at a key level (support, resistance, a structure zone, or a Fair Value Gap). Context is everything.
A candle with a very small body and a long lower wick. The long wick shows that sellers pushed price down aggressively — but buyers came in and rejected that move, closing near the top. At a key support or demand zone, this is a high-probability reversal signal.
The mirror of a Pin Bar — long upper wick, small body near the bottom. Buyers pushed price up but sellers came in hard and rejected it. At resistance or a supply zone, this signals a potential reversal downward.
A large bullish candle that completely engulfs the body of the previous bearish candle. Signals a shift in momentum from sellers to buyers. Most powerful when it appears after a downtrend or at a key support level.
A large bearish candle that completely engulfs the previous bullish candle. Signals sellers have taken control. Most reliable at the top of a move or at a key resistance/supply zone.
A candle whose entire range (high to low) is contained within the previous candle's range. It represents consolidation and indecision. Traders wait for a break of the inside bar's high or low as an entry signal — the breakout direction shows which side won.
Fair Value Gap (FVG / Imbalance)
A Fair Value Gap is a three-candle pattern where the middle candle moves so aggressively in one direction that there's a gap between the first candle's wick and the third candle's wick. This gap represents unfilled orders — an imbalance between buyers and sellers.
Price has a strong tendency to return and "fill" these gaps before continuing in the original direction. Traders use FVGs as entry zones — waiting for price to return to the gap and taking a position in the direction of the original move.
Bullish Fair Value Gap
Order Blocks
An Order Block is the last bullish or bearish candle before a strong, impulsive move in the opposite direction. It represents an area where institutional traders placed large orders — and they often come back to that zone to add more.
- Bullish Order Block: the last bearish (red) candle before a strong bullish move. When price returns to this zone, buyers re-enter.
- Bearish Order Block: the last bullish (green) candle before a strong bearish move. When price returns here, sellers re-enter.
- Order Blocks are most reliable on higher timeframes (1H, 4H, Daily) where the institutional footprint is more visible.
- Combine with FVGs: when an order block and an FVG overlap, it creates a powerful confluence zone.
Liquidity — Where the Stops Are
Liquidity in price action refers to clusters of stop-loss orders sitting above recent swing highs or below recent swing lows. Institutions need liquidity to fill large orders — so they often push price to these clusters to trigger stops, grab the liquidity, and then reverse.
Common liquidity pools:
Common Mistakes
A pin bar at a random price means nothing. The same pin bar at a key structure level, an FVG, or an order block is a completely different signal. Always establish where you are in the market structure before looking for patterns.
Price action strategies work best in trending markets. In a tight range, structure breaks constantly in both directions and patterns fail repeatedly. Identify the market condition first.
By the time you see a clean engulfing candle, the move is already underway. Wait for a retracement or a retest of the pattern level — entering early is always better than chasing.
A bullish pin bar on the 5-minute chart inside a strong downtrend on the 4-hour chart is a countertrend trade. Check at least two timeframes before committing.