Six basic strategies for trading with price action

  • By Author

  • July 14, 2021
  • 12:34 am BST

Many traders make use of multiple charts and pattern strategies to study the market and plan trades. Although this can work, it is often a highly complicated approach to technical analysis. Instead of creating a complex method for your stock and forex trading (or any other trading), you can employ these six simple analysis techniques of price action to monitor the markets and develop successful strategies.


  1. Support and resistance levels with an outside bar 

An outside bar occurs after a break in the support (uptrend) or resistance (downtrend) levels. This can be seen in an uptrend when the lowest price of the current day exceeds that of the previous day’s session. When the session closes, the price will be higher than the high of the previous day. For the downtrend, the same idea is applied but in reverse. Instead of focusing on the outside candlestick, it is wiser to find the outside bar from the previous day’s breakout.

  1. Bouncing off the support line

When a stock price declines to the lower area of the chart only to bounce back and reverse the trend, it is called a spring. To analyze this in terms of price action, it is vital to focus on the candlesticks. As the stock approaches the swing low at one or two percent away, an opportunity presents itself. When the price breaks the trend only to reverse, that swing signals the time to place your positions.

  1. A breakout followed by inside bars

This pattern will be indicated by a collection of candlesticks located as the price begins to coil near the support or resistance levels. The candlesticks will, therefore, be found between the high and low of the most recent swing. It is possible that the breakout will occur before the inside bars. This makes it more likely that the price will eventually penetrate the resistance or support level.

  1. Long wick candlesticks

This is one of the very common trading strategies used by traders trading with price action. This setup is identifiable by a large gap going up or down that occurs during the first few hours of the day, after which a large push can be seen and eventually a reversal in the trend direction. This results in a candlestick with a long wick. Inside bars occur before a break in the bottom of the long wick. After it is broken, the price will continue in its original trend direction.

  1. Measuring the previous swing’s length

The popular phrase “history repeats itself” is highly applicable even in trading. One way of studying price action is by reviewing past trends to prepare for future trends and measuring past price swings. When assessing a chart, the average or common price percentages can be found to the right of the chart. When swing trading, these percentages are likely to be higher and less likely to multiply in size immediately. Through this, you can monitor the common percentages of price swings and plan according to this trend. It is better to trade in moderation than to trade based on hope and wishes.

  1. Monitoring minimal price retracement

The less a price retraces, the stronger the trend is. This can be seen as a signal of a likely continuation of the trend in the same direction. The retracement should be less than roughly 38%. A trend has a better chance of continuing after a breakout once the stock approaches previous swing highs or lows during these conditions. In this case, trading after the morning sessions allows for stronger trends and better opportunities for success.

Trading price action does not have to be overly complex or daunting. By making your setups simple yet reliable, these strategies will benefit your trades without the risk of being too complicated or resulting in losses.