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reader’s message
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There has been a steep bearish move then the Bulls came in,
applied buying pressure to recover from the downward trend.
Then followed a continuation pattern which was cut short by some bearish pressure again.
Finally the market went into sleep as both the Bears and the Bulls became inactive.
I will not trade but wait .
Regards
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3 Components of Price Action Trading
Price action trading has various components.
Here are 5 components traders need to know about price action trading.
Trend line break
When a market has been trending significantly, a trader can usually draw a trend line on the opposite side of the market where the retraces reach.
Any retrace back across the existing trend line is a ‘trend line break’ and is a sign of weakness.
This is a clue that the market might soon reverse its trend or at least halt the trend’s progress for a period.
Trend channel line overshoot
A trend channel line overshoot refers to the price shooting clear out of the observable trend channel further in the direction of the trend.
An overshoot does not have to be a reversal bar, since it can occur during a with-trend bar.
On occasion it may not result in a reversal at all it will just force the price action trader to adjust the trend channel definition.
In the stock indices, the common retrace of the market after a trend channel line overshoot is put down to profit taking and traders reverse their positions.
Climactic exhaustion reversal
A strong trend characterized by multiple with-trend bars.
It has almost continuous higher highs or lower lows over a double-digit number of bars are often ended abruptly by a climactic exhaustion bar.
It is likely that a two-legged retrace occurs after this, extending for the same length of time or more as the final leg of the climactic rally or sell-off.
Double top and double bottom
When the market reaches an extreme price in the trader’s view, it often pulls back from the price only to return to that price level again.
In the situation where that price level holds and the market retreats again, the two reversals at that level are known as a double top bear
flag or a double bottom bull flag retrace will continue.