Price Action Trading Course Lecture Notes

Introduction to Price Action Trading

• Course Overview: Free course on price action trading, moving from basics to advanced levels.
• Sources: Information from trading books, courses, and online resources.
• Approach: Concepts explained for beginner traders.

Basics of Stock Market

• Core Concept: Buying and selling based on demand and supply.
• Trading Methods:
  • Technical Analysis: Uses indicators to predict future prices.
  • Fundamental Analysis: Focuses on company's financials.
  • Quantitative Analysis: Uses statistical tools.
  • Price Action Analysis: Studies pure price behavior without indicators.

Understanding Price Action

• Importance: Helps identify market behavior and trends.
• Focus: Recent and current prices, market trend, and price structure.

Market Structure and Psychology

• Key Players:
  • Retailers: Small volume traders.
  • Institutions: Large volume traders, control market direction.
• Market Phases:
  • Accumulation Phase: Institutions build positions.
  • Uptrend/Advancing Phase: Bullish sentiment, trend traders profit.
  • Distribution Phase: Institutions sell positions.
  • Downtrend/Declining Phase: High selling pressure.

Trading Strategies and Techniques

• Trends and Patterns:
  • Types of Trends: Uptrend, downtrend, sideways.
  • Trend Lines: Used to determine market direction.
• Support and Resistance: Key levels where price action occurs.
• Candlestick Patterns: Indicate potential price movements, e.g., marubozu, hammers, dojis.

Advanced Concepts in Price Action

• Reversal & Breakout Trading:
  • Reversal: Market changes direction, often at key levels.
  • Breakout: Price moves beyond a level, can indicate continuation.
• Volume Analysis: Confirms price movements; higher volume suggests institutional involvement.

Trading Strategies

• Breakout Trading: Enter trades when price momentum is favorable.
• Pullback Trading: Entry after a temporary price reversal.
• Reversal Trading: Identify when a trend may change direction.
• Inside Bar Trading: Use inside bars to time entries; indicative of market indecision.

Specific Patterns and Trading Techniques

• Pin Bars: Significant price rejection, used for reversals.
• Gap Trading:
  • Understands gaps as areas of discontinuity.
  • Breakaway Gaps: Occur at the start of a new trend.
  • Runaway Gaps: Indicate continuation of a trend.
  • Exhaustion Gaps: Potential trend reversal.

Conclusion

• Price action trading focuses on understanding market behavior through price movements without relying heavily on indicators.
• Emphasis on market psychology, key price levels, and volume for successful trading.

Important Reminders

• Practice and backtesting are crucial for mastering price action trading.
• Ensure trades are based on confirmed setups and not assumptions.
• Be aware of market conditions and adjust strategies accordingly.