Price Action (PA) is the art of reading price behaviour from a naked chart — without any indicator. PA traders believe every news event and every market emotion is already reflected in price. Training yourself to read each candle, the structure of the trend, and key levels reveals the intent of the Smart Money moving the market.
5 Core Concepts of Price Action
Candle Anatomy
Body = open-to-close range, Wick = high-to-low extremes the market tested but didn't hold
Support/Resistance
Levels where price has reversed multiple times — zones where buyers or sellers wait
Reversal Pattern
Patterns signaling a turn — e.g., Pin Bar, Engulfing, Double Top
Continuation Pattern
Patterns signaling the trend continues — e.g., Flag, Pennant
Anatomy of a Candlestick
Before reading patterns, you must understand the components of a candle. Each candle tells a story of the battle between buyers and sellers during that time.
High / Low
The highest/lowest price the market touched during that time period
Open
The opening price of the candle (start of the period)
Close
The closing price of the candle (end of the period)
Body (Real Body)
Range between Open and Close: green = Bullish (close higher than open), red = Bearish
Key Reversal Candle Patterns
Power of Price has a set of reversal patterns proven by years of backtesting. Below are common patterns you'll see repeatedly:
Pin Bar (Pinocchio Bar)
A candle with a long wick on one side and a small body at the opposite end. It shows the market pushed one direction but was rejected by stronger opposing force.
Engulfing Pattern
A candle that completely "engulfs" the previous one — a Bullish Engulfing is a large green candle whose body fully covers the prior red candle, signaling buyers have taken control.
Patterns work best when they form at a clear Supply & Demand zone or Key Level — patterns in the middle of nowhere are unreliable. Always combine pattern with context.
Confluence — Stacked Confirmation
Good Price Action isn't trading every pattern you see — it's waiting for confluence: multiple layers of confirmation pointing the same way:
- Key Level — Support/Resistance with prior reactions
- Market Structure — Clear uptrend or downtrend
- Higher Timeframe Bias — HTF aligns with pattern direction
- Volume/Order Flow — Visible buy/sell pressure confirms
Common Mistakes PA Traders Make
Trading Every Pattern
A Pin Bar mid-trend without a key level is usually noise. Only take patterns that form in the right context.
Not Waiting for Confirmation
Entering before the candle closes risks the pattern not forming at all. Always wait for a complete close before decisions.
Looking at Only One Timeframe
An M5 pattern fighting the H4 trend has very low odds — always align across timeframes.
Checklist Before Entering with Price Action
- Identify a clear key level where the pattern forms
- Check bias on higher timeframe
- Wait for complete candle close before entry
- Place Stop Loss beyond the pattern wick
- Calculate RR ratio at least 1:2
- Confirm with at least 2 confluence points
- Log every trade in a journal