What is price action really?

Now we all here about price action trading, but what does it really mean?

Before we hopefully head in to a really constructive debate, can we leave ego’s at the door please? There are a few users on this forum that strongly disagree with each other, but there is common ground, so can we work on the common ground in the interest of helping new and unprofitable traders.

So I’ll start the batting being Head and Shoulders above the rest (ego in jest), it’s a common pattern that indicates a reversal, but I think a common mistake that is done is to look for it within ranges, or when it’s not really obvious, when you can see a really obvious H&S pattern it is more likely to work as opposed to trying to be clever and finding one here and there, the question will still remain if you are in a range depending on POV, TF etc etc.

So - Head and Shoulders, The most important pattern to look out for?

Price Action for me is every change in price on every time frame. Meaning if price moves up for one pip, tick or $ it´s price action.
What you are referring are price patterns. At least in my definition.
The recent price action is forming a price pattern

The best example of PA for me is the pinbar. Let’s say it’s a bearish pinbar, before our very eyes we see the market run out of buyers and the lurking sellers take control.

I not a huge study of candle sticks but the pinbar PA is something that I’ll always take note of. I would add that I like to see the pinbar on 30minute or longer.

Patterns like head and shoulders, I believe become less powerful the further you get from the first shoulder as fundamentals can change the outlook. This can happen with a pinbar but the time frame is so small you are less exposed so for me is a truer form of PA.

Yes I agree H&S is an important pattern however not everyone is a high probability entry. If you really notice a chart, say a 1hr, you will noticve there are H&S all over it. Even the clear ones will fail at times, Its best to look for them after you’ve arrive at a bias say on a daily chart, then you look for H&S on the 1H. Also I think a better entry is at the right tip rather than a break of the neckline.

I use head and shoulders patterns to aid my overall analysis, but the market has been ranging a fair but, recently, on a number of pairs, and for that I find a simple high test into resistance a more reliable indicator of an imminent drop. So for a market that is ranging between two clear areas of resistance a simple high test is my favourite. I agree with previous posters, also, that the term Price Action does mean slightly different things to different people. It can cover candlestick analysis, price movement or price patterns, or all three, depending on whom you talk to. I trade all three, being a predominantly technical trader, so confess I have not got too caught up in which of the schools of thought on definition of Price Action I side with.

I don’t trust H & S very much, but I’ll trade based off of it every once in a while. Sometimes it works, sometimes it doesn’t. I still have my stops and limits in place so I can exit the trade like normal. I agree with you about making sure not to see “hidden head and shoulders” and trading based off of deformed head and shoulders.

I find it reliable when it looks the most obvious and definitely outside of a range, when they are inside a range they look quite erratic anyway, I often think of the market as an elastic band, the more you stretch it, the easier it is to predict, i.e. the looser the shape the more unpredictable.

If say the daily time frame is in a range, H&S on the 1H at the top/R and bottom/S of such range are very rewarding imo. There has been quite a few formed in recent weeks.

It seems to me that the most useful price action pattern is the pullback. Nearly every major move is made in a series of steps. The move begins and people start trying to catch it. Then the profit taking starts which causes a reversal or pullback. Then people start to see the price has reversed too far and start trading in the original direction again. This happens time after time and can be found on most time frames.

I’m a fan of patterns but recently, I’ve begun to look at them in a different light. I think it is wise to be aware of patterns, but to keep them in more of a fuzzy perspective. Squint your eyes more on the pattern and put more weight on the gut instinct.

I do not think it is a good idea to label a pattern too concretely. For example, you mentioned Head & Shoulders… this is a pattern, but in my mind price-action does not equal pattern (at least in this definition). Price action to me is more of a broader view of all information taken as a whole.

Pinbars are one of the few candle patterns that I notice, but in-and-of-itself, they can be useless. Specifically, without input from your intuition about the market pattern, an individual candle pattern is not helpful.

I feel like I’m not explaining myself very well here. In a nutshell, I think the most helpful way for me to observe price action has been to 1) take a step back and view things more broadly; and 2) watch the price move in realtime, because the fluidity of the movement itself gives a LOT of clues vs. the actual resultant candle patterns.

Price action is the CAUSE of those well known chart patterns.

What is price action?
Simply put, direction, and momentum.

The trails those two factors leave behind, are what chart patterns are made of.

Price doesn’t care where it was, which is why patterns often fail.