Price Action in Trading

Price action refers to the movement of a security’s price over time, typically represented on a chart. It is the study of past price movements to forecast future price direction. Here are key elements of price action trading.

  • Candlestick Patterns: Price action traders often analyze candlestick patterns to identify potential market reversals or continuations. Common patterns include engulfing patterns, pin bars, and inside bars.
  • Support and Resistance: Traders identify support and resistance levels on a price chart, representing levels where buying or selling pressure is historically significant. These levels can help traders make decisions about entry, exit, and stop-loss placement.
  • Trend Analysis: Price action traders analyze the direction and strength of trends by observing patterns of higher highs and higher lows in uptrends, and lower highs and lower lows in downtrends. Trendlines are often drawn to visually represent trend direction.
  • Price Patterns: Traders look for recurring patterns in price movements, such as triangles, flags, and head and shoulders patterns. These patterns can signal potential breakouts or breakdowns in price.
  • Market Structure: Understanding market structure involves analyzing the relationship between swing highs and swing lows to determine the current state of the market, whether it’s trending, ranging, or consolidating.
  • Volume Analysis: Volume is often used in conjunction with price action to confirm the strength of a move. High volume during a price breakout, for example, can indicate strong market conviction.
  • Trading Strategies: Price action traders develop various trading strategies based on their interpretation of price movements. These strategies may include trend following, breakout trading, and reversal trading.

Price action trading emphasizes simplicity and focuses on the raw price movement of a security without relying heavily on indicators or other external factors. Traders who master price action analysis develop a deep understanding of market dynamics and are able to make informed trading decisions.

False breakout

Today Nifty 50 and Bank Nifty had false breakout.

  • The market initially exhibited an upward trend by touching the Critical Price Range (CPR), indicating a positive trajectory.
  • However, this turned out to be a major trap, catching many traders off guard and potentially triggering their Stop Loss (SL) orders.
  • In just one candle, the Nifty index plummeted by 280 points.
  • This sharp decline resulted in an overall fall of around 360 points.

Note: This is only in my view.

Are you still confused in selecting the right segment?

There are different types of segments, where you can trade, but not sure which is the best segment and which is the suitable. please understand the different segments before you invest your hard-earned money.

  • Equity Segment: This is the primary segment where shares of publicly listed companies are traded. It includes large-cap, mid-cap, and small-cap stocks. Equity trading in India takes place on two major stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
  • Derivatives Segment: This segment includes futures and options contracts based on various underlying assets such as stocks, indices (like Nifty and Sensex), currencies, and commodities. Derivatives trading allows investors to hedge risks or speculate on price movements without owning the underlying asset.
  • Commodity Segment: Commodity trading in India happens on exchanges like Multi Commodity Exchange (MCX) and National Commodity and Derivatives Exchange (NCDEX). Commodities such as gold, silver, crude oil, agricultural products, and metals are traded here.
  • Currency Segment: This segment deals with the trading of currency pairs. The major currencies traded in India include the US Dollar (USD), Euro (EUR), British Pound (GBP), Japanese Yen (JPY), etc. Currency trading takes place on exchanges like the NSE, BSE, and Metropolitan Stock Exchange of India (MSEI).
  • Debt Segment: This segment involves trading in fixed-income securities such as government bonds, corporate bonds, debentures, and treasury bills. The debt market in India operates through both exchanges and Over-the-Counter (OTC) platforms.
  • Initial Public Offering (IPO) Segment: This segment involves the issuance of new shares by companies to the public for the first time. Investors can participate in IPOs to buy shares of companies before they are listed on the stock exchanges.
  • Mutual Funds Segment: While not a direct segment of the stock market, mutual funds play a significant role in the Indian financial ecosystem. Mutual funds pool money from investors and invest in a diversified portfolio of stocks, bonds, or other securities.
  • Alternative Investment Funds (AIFs): AIFs are a relatively new segment in the Indian market. They pool funds from investors for investing in different asset classes like private equity, real estate, hedge funds, etc.

Understanding these segments helps investors navigate the Indian stock market and choose investment avenues according to their risk appetite, investment goals, and time horizon.

Top trading service provider in Indian Stock market, where you can open Demat Account

List of service provide to open demat account.

  1. Zerodha
  2. Angel Broking
  3. ICICI Direct
  4. HDFC Securities
  5. Sharekhan
  6. Axis Direct
  7. Kotak Securities
  8. 5paisa
  9. Motilal Oswal
  10. Upstox

Other Service Providers

  • Zerodha
  • ICICI Direct
  • HDFC Securities
  • Sharekhan
  • Axis Direct
  • Kotak Securities
  • Angel Broking
  • 5paisa
  • Motilal Oswal
  • Upstox
  • IIFL Securities (India Infoline)
  • SBI Cap Securities
  • Edelweiss
  • Ventura Securities
  • Aditya Birla Money
  • Karvy Stock Broking
  • Geojit Financial Services
  • Reliance Securities
  • Religare Broking
  • SBICAP Securities
  • Indiabulls Ventures
  • Anand Rathi
  • Axis Securities
  • Arihant Capital
  • Choice Broking
  • IDBI Capital
  • Nirmal Bang
  • Bonanza Portfolio
  • JM Financial
  • GCL Securities
  • Master Trust
  • SAS Online
  • Tradebulls Securities
  • Trustline Securities
  • LKP Securities
  • RKSV Securities
  • Samco Securities
  • Swastika Investmart
  • Wisdom Capital
  • MyValueTrade
  • Trade Smart Online
  • Mangal Keshav
  • SMC Global
  • Globe Capital
  • Fortune Trading Corporation
  • Raghunandan Money
  • Religare Securities
  • Beeline Broking
  • Steel City Securities
  • Marwadi Shares and Finance Limited

The Bombay Stock Exchange (BSE)

The Bombay Stock Exchange (BSE) is one of the oldest and largest stock exchanges in India, tracing its roots back to 1875. It is headquartered in Mumbai, the financial capital of India. BSE provides a platform for trading various financial instruments, including equities, derivatives, mutual funds, and debt instruments.

BSE operates on an electronic trading system known as the BOLT (BSE OnLine Trading) platform, which offers high-speed and efficient trading capabilities. The exchange has played a significant role in the development of the Indian capital markets over the years and has contributed to the growth of the Indian economy.

One of the key indices of the BSE is the BSE Sensex, which comprises 30 actively traded stocks representing various sectors of the Indian economy. The Sensex is one of the most widely tracked stock market indices in India and serves as a barometer for the overall performance of the Indian stock market.

In addition to providing a platform for trading, BSE also offers various other services such as clearing and settlement, risk management, and market data dissemination.

Overall, BSE serves as an important institution in the Indian financial system, facilitating capital formation, providing liquidity to investors, and promoting transparency and efficiency in the Indian stock market.

National Stock Exchange of India (NSE)

The National Stock Exchange of India (NSE) is the leading stock exchange in India, offering a platform for trading various financial instruments including equities, derivatives, debt instruments, and exchange-traded funds (ETFs). Established in 1992, the NSE has become one of the largest and most advanced stock exchanges in India.

It operates on a fully automated screen-based electronic trading system, providing investors with a transparent and efficient trading environment. The NSE has played a significant role in modernizing India’s capital markets and has contributed to the growth and development of the Indian economy.

The benchmark index of the NSE is the Nifty 50, which comprises 50 large-cap Indian stocks across various sectors. The performance of the Nifty 50 is widely used as a barometer for the Indian stock market.

Overall, the NSE plays a crucial role in facilitating capital formation, providing liquidity to investors, and enabling price discovery in the Indian financial markets.

Click Here for More details on NSE