Updated on March 7, 2023
Price action refers to the price movements of a particular security that is studied over a period of time after graphically plotting it.
The stock charts represent the price trends which allow the traders and investors to understand the current and upcoming trends as well as possible indications of trend reversals. Short term traders usually rely on price action to take suitable trading positions and aim to make short term profits along the way. This analysis also helps in pinpointing the optimum entry and exit points for traders.
How is price action studied?
The study of price action can be through studying candlestick patterns, stock charts, moving averages, etc. However, the interpretation of price action is quite subjective and is therefore not a concrete science or a study with a definitive script for stock trading. Therefore, traders have to back their analysis with suitable assurances while taking a trading position rather than simply relying on price action.