Chapter 1: What is "Price Action Trading"?
All price changes in the bitcoin market come from the so-called "bulls" (buyers) and the "bears" (sellers). For example, when the price of BTCUSDT goes up, it is because there are more bulls than bears, and when the price goes down, there are more bears than bulls.
On the bitcoin market, there is a constant battle between these bulls and bears.
Price Action Trading is about analyzing who is currently the boss, or who sets the price, The bulls, or are the bears? And how long will they remain in charge before the roles are turned?
If your analysis shows that the bulls are in control and will continue to do so for the time being, then you can buy some of these coin pairs you have bought (go long).
If it turns out that the bears are in control and this will continue to be the case, then you can choose to sell these coin pairs you have bought (going short).
But how do you determine who is currently in control, the bulls or the bears? You can do this by using two simple "Price Action" techniques:
1. “Support” and “Resistance” areas.
In other words, support and resistance areas.
These are the buying and selling areas that you can easily find on the charts.
When the price arrives in these areas, the price will likely stay around that current price, or it will fall or rise. Think of it as a ceiling (resistance) and a floor (support) in your living room or bedroom. You do not easily "breakthrough" this.
The great thing about these areas is that you can buy or sell at the right time.
Later in this book, we will, of course, go further and deeper into the support and resistance areas and how to apply them in the Price Action strategy.
2. Advanced analysis of the “Candlesticks.”
No, this does not include the standard terms such as the "Doji", "hanging man", "shooting star" etc. that you have probably seen somewhere in a YouTube tutorial "How to learn to read candlesticks".
Advanced candlestick analysis goes much further than that. The point is that you can read the story of what the chart is telling you.
Once you understand and can do this, you can see from a glance at the charts who is in charge of the price of the coin you are looking at on the chart (the bulls or the bears). You will also see whether you should buy or sell.
These two techniques provide the basis for the Price Action Trading strategy. Moreover, these are the only two techniques with which the most successful trading moments are found.
Three things stand out when you start using this way of trading:
● Technical indicators are NOT used.
● There are NO difficult or confusing techniques.
● There is NO stress.
It is purely about reading the graphs and making smart decisions based on what the charts are telling you.