Step 4: Price Action
Price action means reading what price itself is doing, candle by candle, at the levels that matter. In Step 2 you learned to name candles. In Step 3 you learned larger shapes. This step puts them together into complete setups, then adds a few tools that confirm what price is already telling you.
The market is a tug of war between buyers and sellers. Candles show who is winning at each moment. Your job is to trade with the side that is winning, at a price where you can prove yourself wrong cheaply. Before every trade, ask yourself: "Why am I in this trade?" The answer should always come from price action.
Lessons in this step
- Reading price action
- Combining candles into a higher timeframe
- Wicks, shadows, and what they say about control
- Accumulation at the bottom and distribution at the top
- Sandwich pattern
- Dominance inside a flag
- Slowdown in momentum
- Mother candle, inside bar, outside bar, and pin bar
- Decisive candles at double tops and double bottoms
- Gaps: common, breakaway, runaway, exhaustion, and island reversal
- Genuine and fake breakouts and breakdowns
- The failed-breakdown and failed-breakout reversals
- A quick reference of every setup
- Confirmation tools
- Candles with moving averages
- Bollinger Bands, including the 3-standard-deviation band
- ADX with +DI and -DI
- Heikin-Ashi candles, including trailing a stop with them
- Timing the entry with two timeframes
- Adapting to market conditions
- One confirmation checklist for every setup
What to do next
When you can explain every setup in the quick reference and confirm it with one tool, go to Step 5: Wave setups.