Price action in share market is defined as how a price of stock is behaving with respect to time. Let me explain you with example,come lets see what is price action in share market?.
Price Action in Share market
Identifying behavior in price of company with respect to different time frame and understanding technically whether its showing us any direction is called Price action. Just by identifying this investor can identify trend in stock or market. This also defines how does supply and demand is working in current market.
How do you predict price action?”
Predicting price action requires some knowledge of how we read charts , candlestick and their patterns, trendline. Based on that we can predict.
What is the best way to learn price action trading?
Price action is considered as form of Technical analysis. So there are some prerequisite which is required to learn this price action.
- Candlestick
- Candlestick pattern
- Trend line
Candlestick: This is Japanese term to show price of stock on that moment of time frame. This will be in the form of candles which will represent price of stock at different time frame. Please read our article for more information on this.
Candlestick pattern: There some candlestick patterns already prementioned in stock market that if those patterns appears then there are some chances that mentioned outcome can happen.So how this patterns are formed? patterns are formed based on stock price variation happening on that stock.
Trend line: Whenever a stock price movement is happening it will form support and resistance areas depending on number of buyers and sellers. So there areas can be identified by adding some form of line to identify trend. This is called Trend line.
Once you are able to identify above 3 points in chart , you are almost there. Next phase is to identify how chart is logging after we observed candles,patterns and trend line.
Is there is indication of Higher High, or lower low formation? is there any down trend is shown? is there any resistance for the Break out etc. Will see above 3 one by one.
How to identify higher high and lower low?
First we need to start seeing stock in larger time duration, at least on daily or weekly. Then observe whether we are able to see some patter of climbing down the step, or climbing up the steps . Its just that simple. Don’t worry will show you example.
Add Trendline at support and resistance. and observe below patters . Below we have added Lower low on nifty and Higher high patter on Schaeffler Stock( Not recommended)
How does supply and demand work in stocks?
Just to go with word, supply is number of stock available in market ,where as Demand is number stock which are required in market. When somebody tries to Buy a stock, there should be stock available in market to buy, otherwise buying is not possible.
If all stocks of particular company is all bought and still demand is more, but there is no supply. Then we can buy more, Both supply and demand should go hand in hand.
If some sells, then only some can buy. Otherwise there is no way one can buy . Same way with sell, if some news comes that particular company is not doing good, many tries to sell, but if there are no buyers , sellers wont be able to sell. They will be stock. So liquidity in stock is also makes a good point for stock.
What is price action with example?
Here we tried to take some real time stock and identified price with example. Kindly check.
Conclusion
Understanding price action just requires practice and knowledge about candlestick, trendline. So try to practice it with many practical examples and observe whether is working for you or not. More you practice , more convincing chart will be.
Frequently Asked question
1)Is price action a good strategy?
One who learns price action do not need any other indicator in stock market. So this is best strategy to understand trends in stock market.
2)What time frame is best for price action?
Price action is always good with larger timeframe. More time you take to analyze , will provide more accurate date. Ideally Weekly or monthly.
3)What is the difference between price action and technical analysis?
Technical analysis is part of Price action. If you want to learn Price action, we need to learn first Technical analysis.We have covered steps to identify Price action above. kindly check.