To understand why Price Action Trading, lets first discuss

what is Price Action based trading?

Price Action Trading (P.A.T.) is a trading technique under

which all the trading decisions are based on the historical
and recent price movements. The price is supreme and
responsible for all the actions as a trader, as our Gujju
friend would say “Bhav Bhagwan Che”.

No importance is given to the third-party indicators, news,

or the fundamental data. Therefore it is also referred to as
“naked trading” as price action traders use “naked price
Price action has already taken fundamental Indicators into
account as will price will discount those factors
charts” without any technical indicators.
- Price Information
-Basic Identification for support and Resistance
- Check the volume if there is a breakout
Let’s compare two charts below, one with all the indicators and another a clean price action bar chart.

Technical Indicators divert the attention from Raw price action

So what do we observe?

We can easily find out that in the first chart full of indicators there is very little space left for the price action bars, which
diverts all the attention from the raw price action to the other number of variables.
While using this trading technique traders save themselves from “lagging
indicators”. Lagging indicators such as Moving Averages (MA), Moving
Average Convergence Divergence (MACD), RSI, Bollinger Bands, etc. react
when the price has already moved and therefore giving a less attractive
risk-reward each trade. Many indicators contradict each other

Taking trade based upon the raw price action will not provide any profit
guarantee but will help in identifying the trades early and thus increasing
odds of trade becoming successful. Analysis other market participants actions

Most of the indicators derive their value from the prices and therefore
indicators won’t provide any extra information which you require for
successful trading rather it will lead to confusion as most of the time these
indicators are lagging and contradicting each other.

Price charts indicate intentions of all the market participants (buyers &
sellers) and therefore all your trades can be based upon the movement of
the prices. It also gives an edge to the Price Action traders because their
decisions are based on the mood of all the other market participants rather
than their own predictions. Also, the impact of all the economic events/news
is reflected in the prices and therefore no need to follow and track these
events to trade the markets successfully.
There are hundreds of thousands of market participants buying and selling securities for a wide
variety of reasons: the hope of gain, fear of loss, tax consequences, short-covering, hedging, stop-
loss triggers, price target triggers, fundamental analysis, technical analysis, broker
recommendations and a few dozen more.

Chart patterns put all buying and selling into perspective by consolidating the forces of supply and
demand into a concise picture.

As a complete pictorial record of all trading, chart patterns provide a framework to analyze the
battle raging between bulls and bears.

More importantly, chart patterns and technical analysis can help determine who is winning the
battle, allowing traders and investors to position themselves accordingly.
The vast majority of chart patterns fall into two main groups: reversal and continuation. Reversal
patterns indicate a change of trend and can be broken down into top and bottom formations.
Continuation patterns indicate a pause in trend and indicate that the previous direction will
resume after a period of time.
Bullish patterns may form after a market downtrend, and signal a reversal of price movement. They
are an indicator for traders to consider opening a long position to profit from any upward
trajectory.

Bearish candlestick patterns usually form after an uptrend and signal a point of resistance. Heavy
pessimism about the market price often causes traders to close their long positions, and open a
short position to take advantage of the falling price.
 There are dozens of bullish reversal candlestick patterns. We have elected to narrow the field by selecting
the most popular for detailed explanations. Below are some of the key bullish reversal patterns with the
number of candlesticks required to form.

Patterns can be used alone for trading ?

Candlesticks provide an excellent means to identify short-term reversals, but should not be used alone. Other
aspects of technical analysis can and should be incorporated to increase reversal robustness. Below are two
ideas on how traditional technical analysis might be combined with candlestick analysis.

i) Support

Look for bullish reversals at support levels to increase robustness. Support levels can be identified with moving
averages, previous reaction lows, trend lines or Fibonacci retracements.

ii) Volume

Volume helps us to determine the health of a trend. An uptrend is strong and healthy if volume increases as price
moves with the trend and decreases when the price goes counter-trend (correction periods or 'pull backs')
Hammer Pattern
Bullish Engulfing
Morning Star
Three White Soldiers
 There are dozens of bearish reversal candlestick patterns. We have elected to narrow the field by selecting
the most popular for detailed explanations. Below are some of the key bearish reversal patterns with the
number of candlesticks required to form.

Patterns can be used alone for trading ?

Candlesticks provide an excellent means to identify short-term reversals, but should not be used alone. Other
aspects of technical analysis can and should be incorporated to increase reversal robustness. Below are two
ideas on how traditional technical analysis might be combined with candlestick analysis.

i) Support

Look for bearish reversals at support levels to increase robustness. Support levels can be identified with moving
averages, previous reaction lows, trend lines or Fibonacci retracements.

ii) Volume

Volume helps us to determine the health of a trend. A downtrend is strong and healthy if volume increases as
price moves with the trend and decreases when the price goes counter-trend (correction periods or 'pull backs')
Shooting Star
Bearish Engulfing
Evening Star
Three Black Crows
 What is Support
& Resistance
Support and resistance represent key
junctures where the forces of supply and
demand meet. In the financial markets, prices
are driven by excesses of supply (down) and
demand (up).

"Win over your greed

& fear to be a 14
successful trader."
 Trading
Range

"Win over your greed

& fear to be a 14
successful trader."
 Support &
Resistance Zone

"Win over your greed

& fear to be a 14
successful trader."
 Dynamic
S&R
- Simple Moving Average
- EMA

Basically using 50 and 200 MA and EMA

"Win over your greed
& fear to be a 14
successful trader."
 Horizontal
S&R
- Hortizontal line as support and resistance

"Win over your greed

& fear to be a 14
successful trader."
 Trend
Lines
- Basics of Trend lines when a trend line acts as Support and Resistance
- Use trend line with horizontal support and resistance
- More touches the line will continue

"Win over your greed

& fear to be a 14
successful trader."
S&R
 How to draw
trend lines with
real example ?

"Win over your greed

& fear to be a 14
successful trader."
 How to draw
horizontal lines
with real
example ?
"Win over your greed
& fear to be a 14
successful trader."
Gaps
 What are gaps
on charts ?
Extra Ordinary buying /selling in the stock/ Indice
cuzes Gap up and Gap Down.

"Win over your greed

& fear to be a 14
successful trader."
 Types of
Gaps ?
-Common Gap
- Breakout Gap

"Win over your greed

& fear to be a 14
successful trader."
 How to trade
Gaps ?

"Win over your greed

& fear to be a 14
successful trader."
Price Action Tool
Fibonacci Retracements are ratios used to identify potential reversal
levels.

These ratios are found in the Fibonacci sequence. The most popular
Fibonacci Retracements are 61.8% and 38.2%.

Note that 38.2% is often rounded to 38% and 61.8 is rounded to 62%.

After an advance, chartists apply Fibonacci ratios to define retracement

levels and forecast the extent of a correction or pullback.

Fibonacci Retracements can also be applied after a decline to forecast

the length of a counter-trend bounce. These retracements can be
combined with other indicators and price patterns to create an overall
strategy.
Fibonnaci sequence - 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610……

The sequence extends to infinity and contains many unique mathematical properties.
Fibonnaci sequence - 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610……

The sequence extends to infinity and contains many unique mathematical properties

After 0 and 1, each number is the sum of the two prior numbers (1+2=3, 2+3=5,
etc…).
A number divided by the previous number approximates 1.618 (21/13=1.6153).
A number divided by the next highest number approximates .6180 (13/21=.6190,
). This is the basis for the 61.8% retracement.
A number divided by another two places higher approximates .3820
(13/34=.382). This is the basis for the 38.2% retracement. Also, note that 1 -
0.618 = 0.382.
A number divided by another three places higher approximates .2360
(13/55=.2363). This is the basis for the 23.6% retracement.
o Think of a situation where you wanted to buy a particular stock
but have not been able to do so because of a sharp run-up in
the stock. In such a situation the most prudent action to take
would be to wait for a retracement in the stock.

o Fibonacci retracement levels such as 61.8%, 38.2%, and

23.6% act as a potential level up to which a stock can correct. By
plotting the Fibonacci retracement levels the trader can identify
these retracement levels, and therefore position himself for an
opportunity to enter the trade. However please note like any
indicator, use the Fibonacci retracement as a confirmation
tool.
Trading
Following the rule means you never risk more than 1% of your account
value on a single trade. That doesn't mean that if you have a
₹1,00,000 trading account, you can only buy ₹ 1,000 worth of stock.

No one wins every trade, and the 1% risk rule helps protect a trader's
capital from declining significantly in unfavorable situations. If you risk
1% of your current account balance on each trade, you would need to
lose 100 trades in a row to wipe out your account. If novice traders
followed the 1% rule, many more of them would make it successfully
through their first trading year.

If you risk 1%, you should also set your profit goal or expectation on
each successful trade to 1.5% to 2% or more.

Each trader finds a percentage they feel comfortable with and that suits the liquidity of the
market in which they trade. Whichever percentage you choose, try to keep it below 2%.
The risk/reward ratio is used to assess the profit potential (reward)
of a trade relative to its potential loss (risk).

When figuring out the risk/reward for a trade, place the stop-loss
at a logical place. Then, place a logical profit target based on
your strategy and analysis. These levels should not be randomly
chosen. When the stop-loss and profit target locations are set, only
then can you assess the risk/reward of the trade and decide
whether the trade is worth taking.

Choosing the best risk/reward ratios is a balancing act between

taking trades that offer more profit than risk while ensuring that the
trade still has a reasonable chance of reaching the target before
the stop loss. That is a risk to reward ratio on its own is
meaningless.

Winning rate & risk reward is what matters

Is leverage trading dangerous?
Leverage trading can be dangerous because it amplifies your
potential investment losses. In some cases, it’s even possible to lose
more money than you have available to invest.

Is leverage trading good?

Leverage trading can be good because it lets investors with less
cash increase their buying power, which can increase their returns
from successful investments.

Do you have to pay back leverage?

Yes. If you borrow money to invest, such as by trading on margin,
you will have to pay it back to your broker. Many brokers also
charge interest on margin loans, increasing the cost of investing
with leverage.

Leveraging is risky!
Strategies
 The most commonly used Price Action indicator is
candlesticks. These candles form patterns that can be
used for developing Price Action Trading strategies.

By now we have understood that a Price Action trader

Price Action intent is to read the price movements and accordingly
identify price action signals using chart patterns and

Trading find out key levels in the chart.

Strategies These price action based signals are combined by the

traders and collectively referred to as Price Action
Trading strategies. All their trades revolve around
these strategies. The most prominent strategies are
Support & Resistance Level Trading Strategy; Pin Bar
Trading strategy; Inside bars; candlestick patterns
such as Harami, Hammer, Shooting star, etc.
 STRATEGY ONE

COMBINING TECHNICAL
ANALYSIS WITH FUNDAMENTALS
FOR SHORT TERM TRADING
Naukri.com Case Study

We purchase data for Jobaaj.com Great Resignation

No discounts were offered High attrition will lead to bulk hiring

IT hiring Price Action Tools

Everthing is digital after covid Major Support
 STRATEGY TWO

FIBONACCI RETRACEMENT WITH

CANDLESTICK PATTERN

Indigo Airlines
Thank You
Win over your fear & greed in order to be a successfull
trader.
- CA Saksham Agarwal

Wish you a happy Trading or Investing

Journey.