[Price Action Tutorial] What is Price Action?

1. The Philosophy of "Naked Trading"

Price Action (PA) is a trading methodology often referred to as "naked trading." This nomenclature stems from the practice of analyzing a "naked" chart—one devoid of technical indicators, news overlays, or fundamental data. Instead, the trader relies solely on the raw data of price movement over time.

Unlike other forms of technical analysis that rely on lagging indicators (such as MACD, RSI, or Stochastic), Price Action is rooted in the belief that price is the ultimate truth. Proponents of PA argue that all global economic variables, news events, and market sentiment are instantly reflected in the price. Therefore, analyzing secondary indicators is redundant because the price action has already processed the information.

2. The Psychology Behind the Chart

Price Action is not merely about geometric lines; it is a method for forecasting financial markets by analyzing behavioral history. It serves as a visual representation of human psychology. Every candlestick pattern, swing high, or swing low represents the collective "footprint" of all market participants—from retail traders to institutional algorithms. By reading these footprints, a trader reconstructs the thought process of the market, identifying where fear, greed, and hesitation occur.

3. Simplicity and Structure

The core tenet of Price Action is simplicity. Traders are encouraged to avoid "over-analyzing" or cluttering their charts with mathematical overlays that distract from the price itself. Instead, PA focuses on the structural relationship between current prices and past prices. It identifies market structure through:

• Swing Highs and Lows: Peaks and troughs that define trends.
• Support and Resistance: Key levels where price has historically reacted.
• Patterns: Repetitive setups that indicate high-probability future moves.

Conclusion: Price Action is the purest form of technical analysis, prioritizing the immediate reality of price over historical averages calculated by indicators.