Definition
Price action describes how traded prices develop rather than a single calculated indicator. Analysts often examine candles, swing highs and lows, ranges, and reactions around previous levels. The focus is on observable market movement, although volume and other information may still be used as context.
How It Works
For example, a sequence of higher highs and higher lows can describe an upward structure on a chosen chart interval. A move beyond a previous range is a breakout; a subsequent return inside it changes the interpretation. The same asset can show an upward structure on a short interval while remaining in a longer downtrend.
Key Considerations
Patterns depend on the timeframe, data source, and the analyst’s judgment. A recognizable formation does not identify its cause or guarantee continuation. Historical charts can make turning points appear more obvious than they were in real time. Price-action observations therefore need explicit definitions and an invalidation condition if used to test a trading idea.