Price action is the practice of reading the market’s language directly from price. Indicators summarize the past; price action shows the story as it unfolds. Candles do not lie—each one captures a brief negotiation between buyers and sellers. When you learn to read those negotiations, you stop chasing signals and start understanding context.
Candles: the market’s alphabet
Every candle tells a story. Wicks (shadows) record rejection—where one side tried to push price but failed. Long upper wicks show selling pressure into highs; long lower wicks reveal buying interest into lows. The real body speaks to momentum: broad bodies imply urgency, small bodies show hesitation. A sequence of bodies and wicks is more meaningful than a single candle; it reveals how aggression and defense evolve around levels.
Practical reads many traders use:
- Rejection wick at a level: interest appears but not yet confirmed. Wait for the next candle to close.
- Engulfing body: urgency increases as the market re-prices quickly.
- Inside bar: compression; energy is stored and often released with a decisive close.
No close, no break
Many beginners mistake a wick that pokes through a level for a true breakout. Price tests levels constantly; only a close beyond the level confirms a break. “No close, no break” is a guardrail against traps. A confirmed break requires two pieces:
- Break: price trades beyond a defined support or resistance level.
- Close: the candle finishes beyond that level, proving acceptance.
When both occur, structure actually changes. If price only wicks through and closes back inside, you have evidence of rejection rather than continuation. This simple filter keeps you out of many false moves.
Trend structure and momentum
Classic structure identifies trends by swing behavior: higher highs with higher lows define an uptrend; lower highs with lower lows define a downtrend. But structure alone is not enough—momentum matters. Strong trends show decisive closes in the trend direction and shallow pullbacks. Weak trends print overlapping bodies, long opposite wicks, and deeper retracements. Read trend in three layers:
- Direction: HH/HL or LH/LL.
- Acceptance: closes beyond prior swing levels.
- Character: impulsive legs vs. corrective pullbacks.
2B and 3CR: two reliable turning cues
A failed break often precedes reversal. One classic pattern is the 2B reversal: price pushes beyond a prior swing high or low, fails to hold the close, and then closes back inside the range. That failure exposes exhaustion in the original move. Another is the three-candle reversal (3CR): a strong candle in the prevailing direction, followed by a pause or failed follow‑through, and then a decisive close in the opposite direction. Neither pattern is magic; both require location (a meaningful level) and confirmation (a close that seals the intent).
Break–pullback–close sequences
Not every opportunity is a top or bottom. Continuation trades often come from a clean break and close, followed by a pullback that respects the broken level, and a fresh close in the trend direction. Think of it as “prove it, test it, confirm it.” The initial break proves intent, the pullback tests commitment, and the confirming close tells you participants accepted the new level.
Psychology in price
Price action is also psychology. Panic selling prints long lower wicks into higher‑timeframe demand; patient accumulation prints stair‑step bodies with shallow pullbacks. Choppy, overlapping candles reflect uncertainty and position unwinds. Your job is to recognize the emotional tone without becoming emotional yourself. If the chart looks frantic, trade smaller or stand aside until a close clarifies direction. If the chart looks calm and directional, wait for your pattern and execute without drama.
Confirmation as a habit
Signals are suggestions, not orders. Build the habit of waiting for confirmation—usually a close that aligns with your idea. For a 2B you want the close back inside the failed level; for a 3CR you want the third candle to actually finish; for a continuation you want the pullback to hold and the next candle to close with intent. Confirmation does not guarantee success, but it tilts probabilities and reduces avoidable losses.
Practical checklist for intraday traders
- Mark higher‑timeframe zones on H4/H1; execute on M15–M1 only when the story aligns.
- Define invalidation before entry. Your stop goes where the narrative breaks.
- Size positions from risk, not from hope. Risk per trade: 0.25–1.00%.
- During London–New York overlap, favor clean breaks and closes; avoid chasing wicks.
- Journal each trade: context screenshot, entry, exit, and a one‑line lesson.
Common mistakes and fixes
- Chasing wicks: fix by requiring a close beyond level.
- Trading every bar: fix by selecting two A+ locations per session.
- Ignoring momentum: fix by grading impulse vs. pullback quality.
- Moving stops impulsively: fix by defining invalidation in advance.
- Over‑leveraging: fix by capping risk and letting frequency do the work.
Why price action first?
Price action is indicator‑agnostic. You can add tools later—moving averages, volatility bands, or session ranges—but the core skill is reading closes, wicks, and structure. That core travels with you across markets and timeframes. It keeps you honest when signals disagree and helps you act when signals lag. Mastering price action does not mean predicting every turn; it means behaving consistently when the story is clear—and conserving capital when it is not.
Conclusion
Price action is the cleanest expression of market intent. Read candles as sentences, levels as punctuation, and closes as full stops. Breaks without closes are rumors; confirmed closes are evidence. Align with structure, demand confirmation, and keep risk small. Over time, this simple discipline replaces excitement with steady execution—the kind that allows consistency to compound.