price action
The movement of a security's price over time, used by technical analysts to make trading decisions based purely on price patterns without indicators.
Example
“The price action showed a clear double bottom pattern, suggesting the downtrend was reversing.”
Memory Tip
PRICE ACTION = reading the story told by price movements alone. No indicators needed.
Why It Matters
Understanding price action helps traders and investors make decisions based on what the market is actually doing rather than relying solely on external news or indicators. By recognizing price patterns and trends, you can better time your trades and reduce reliance on complex trading tools that may lag behind real market movements.
Common Misconception
Many people believe that price action trading means ignoring all other information and analysis, but it actually complements fundamental analysis and other tools. Price action is simply one lens through which to view market behavior, and successful traders often combine it with risk management and market context.
In Practice
A trader notices that a stock has repeatedly bounced off the 50 dollar support level three times over two months, forming a clear pattern. When the price approaches 50 dollars again, the trader buys because price action history suggests it will likely bounce upward once more, and sells near the 55 dollar resistance level where previous bounces have peaked.
Etymology
PRICE (market value) ACTION (movement, activity). The ACTION (movement) of the PRICE over time.
Common Misspellings
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Related Terms
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See Also
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