Beginners Introduction to Price Action Trading – Part 1

This article is aimed at beginners who are completely new to trading/investing and want to know about how the same is done via charts.

A chart is nothing but a graphical representation of data. There are different way to represent this data like bar chart, line chart, candlestick chart, point and figure charts etc., but for our learning we stick to candlestick chart. The price data is obtained from the exchange and plotted using a Charting Software.

Each and every Candle comprises of

1) Open – The price at which trading commenced for the session

2) High – The highest price at which it got traded during the session

3) Low – The lowest price at which it got traded during the session

4) Close – The price at which trading closed for that particular session and

5) Volume – The number of shares traded during that particular session (shown in histogram format below candlesticks)

When people talk about price action trading, they are simply referring to the fact, that they make their trading/investing decision to buy/sell a particular stock using a simple candlestick chart along with volumes. When candle is plotted on a continuous basis on a chart, one can see the overall price movement/trend in that particular stock.

For ex., have a look at the stock chart shown below. The stock name is Hindustan Petroleum and the each and every day, a candle is plotted on a chart, along with the volume for that particular session.

What we do with the above chart, we will discuss in the next part. Meanwhile, any doubts on the basics, feel free to post your questions, and we will answer it back. 

About Author
Jayaraj V 
Director - Academy at Tradonomix

Jayaraj with an MBA in Finance and comprehensive teaching experience to boast of, trading acted like a magnet, pulling him towards it, to trade the financial market. The main attraction, he says, was the dynamic nature of trading along with all the challenges it came with. He works as the Director – Academy at Tradonomix.