Advanced Price Action Analysis

Advanced Price Action Analysis

In this article, I am going to discuss Advanced Price Action Analysis. This is a continuation part of our previous article, so please read our previous article before proceeding to this article. As part of this article, I am going to discuss the following pointers in detail.

  1. What is high and low?
  2. What is the swing high and swing low?
  3. Criteria for drawing swing high and swing low
  4. Types of swing high
  5. Strength and Weakness of Trend through Analysis Swing.

Before going forward let me know you that, This is the extension part of price action analysis. so I would suggest going through the previous article

How to Study Candlestick

Price Action Analysis

Let’s begin

Understanding Market Structure through swing

It is similar to learning to read a new alphabet-once you understand the characters, you can read the words, and once you know the words you can read the story. The first letter to master tells you what market activity causes the formation of a short-term high or low. If you learn this basic point, the meaning of all market structures will begin to fall into place.

The market moves in the up-down wave, what we call a market swing. In a healthy bull trend, the upswing generally exceed the downswing in length, the reverse is true for the bear market

Hence by observing market swing, we are able to glimpse into the structure of the market and get clues on whether the market will move up or down

Swing high and swing low
Criteria for drawing swing high and swing low

SWING HIGH Or SWING LOW CONSIST OF MINIMUM 5 BAR. The middle bar must be higher high and higher low then the two proceeding bar and the two following bar

Advanced Price Action Analysis

Restriction for drawing swing high and swing low
  1. If bars high is parallel to the middle or high(LOW) bar, it does not count as one of the five bars in the swing HIGH (LOW) because it does not have a lower high(HIGHER LOW) than the middle bar
  2. TWO ADJACENT swing high or swing low may share bars

Advanced Price Action Analysis Advanced Price Action Analysis in Trading

  1. A swing high
  2. B both swing high and swing low, this happens because two proceeding bar and two following bar are inside bars, that fulfills the requirement of the middle bar must be the highest or lowest point of five bar sequence
  3. C both up and downswing by sharing bar
  4. D requires six-bar to form swing high as the fifth bar is equal high to the middle bar
Why important?

These points not random, they created by the market. they represent momentary changed and demand and supply forces

The bulls could not move the market above the swing high. This means that at that point in time, no one was willing to offer a price higher than the swing high. Traders saw no value above the swing high

In a nutshell, there are two key skills in reading price action:

  1. Evaluate how likely a swing pivot will hold up as support/resistance
  2. Understand the implication of a swing pivot not holding up as support/resistance
Swing types

There are two types of swing

  1. High and low
  2. Swing high and swing low

Let me explain to you

Swing low(SL)

The market tried to move down. Then, it stopped and the bullish trend resumed. The market broke all resistance(swing high) and made a new trend high. In other words, the market failed terribly in its attempt to move down. The lowest point it pushed to is called swing low

Swing low(SL)

Tip: valid pivot makes sense only within the trending price action. To find a valid low, you need to know the start point of the trend and the last extreme trend high

Then what about point B. Point B called a LOW not swing low

Swing low

Every major market has some pullback are shallow and some last for one swing. The point where pullback goes deeper and lasts for more than one swing, forming a LOW. Eventually, this deeper pullback terminated and the trend resumed.

a low become a swing low once price breaks out above the last extreme price high for the resumption of the bullish trend.

Let me explain to you

Swing low

Price Action Analysis in Detail

All the concept are discussed above are applicable for a swing high and high

HOW TO KNOW WHEN LOW BECOME SWING LOW

When price cleared the above swing high level

To clear a price level, the market must form a price bar that is completely above the price level. This means if a bar low is higher than a price level, the market has cleared above the price level.

HOW TO KNOW WHEN LOW BECOME SWING LOW

UNDERSTANDING MARKET SWINGS in Advanced Candlestick Analysis

We have understood how to find out swing high and swing low

Let understand STRENGTH AND WEAKNESS OR TREND THROUGH ANALYSIS OF swing

  • Momentum
  • Thrust and pullback
  • Volume
What is Momentum?

The rate at which price move with respect to time

We are simply observing price action in order to compare the current speed and acceleration of price movement with historical speed and acceleration

Momentum is visible on a chart through observing the slope (angle) of price movement

What is Momentum?

The same concept applies to price action on charts. Changes in momentum are observed through changes in the slope (angle) of the price action

Analysis of momentum is not about measuring any absolute value of momentum, but in making a comparison of current price action momentum with prior price action momentum.

WE can compare through

  1. Candle
  2. Swing
Momentum through candle

Compare the momentum of the current candle with the momentum of the previous candle

Momentum through candle Momentum through candle

BAR COUNTING
  1. Counting number of bars in a half cycle and comparing one-half cycle to another (previous half cycle)
  2. Comparing each swing(relative strength of move)
  3. How much time to get up or how much time to get down

BAR COUNTING in Price Action Analysis BAR COUNTING in Price Action Analysis Price Action Analysis Price Action Analysis Price Action Analysis

Momentum through swing
  1. Compare the momentum of the current price swing with the momentum of the previous price swing in the same direction?
  2. Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?
  3. Is the current price accelerating or decelerating? What does that mean?
1) Compare the momentum of the current price swing with the momentum of the previous price swing in the same direction?

1) Compare the momentum of the current price swing with the momentum of the previous price swing in the same direction?

Now let’s remove the downswing and study what it is showing Is price faster or slower than before?

Is price faster or slower than before

Compare the slope of UP-swings (a), (c) (e) and (g). Note the decreased speed on each of these legs, indicating a reduction in bullish momentum. Weakness is appearing on the bullish side.

Clearly shows upward momentum decreasing

Now putting the same chart with only downward momentum

Clearly shows upward momentum decreasing

Compare the slope of upswings (B) (D)(F) and (H). Note the increasing speed on each of these legs, indicating an increase in bearish momentum. bearish price swings are showing signs of strength.

BY COMPARING THE SWING IT indicating an increase in bearish momentum. bearish price swings are showing signs of strength. The price movement is more likely to continue in the direction of strength and against the direction of

weakness.

Clearly shows upward momentum decreasing

2) Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?

Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?

That is, comparing the current bullish swing with the previous bearish swing; or comparing the current bearish swing with the previous bullish swing

Note the slope of (a) is quite steep compared with the slope of (b). The latest upswing (b) has shown weakness compared with the previous downswing (a). Strength is still in the bearish direction.

Bullish upswing (d) shows an increase in speed compared with the last downswing (c). While the strength is now to the bullish side.

The shallow angle of downward momentum compared with the steep rise of upward momentum indicate Strength is now clearly on the bullish side.

The price movement is expected in the direction of strength and against the direction of weakness.

Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?

3) Is the current price accelerating or decelerating? What does that mean?

Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?

Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?

Compare the momentum of the current price swing with the momentum of the previous price swing in the opposite direction?

The deceleration in this example is evidence of bullish momentum gradually weakening as bearish pressure overcomes any bullish pressure.

In this article, I try to explain Advanced Price Action Analysis in Trading. I hope you enjoy this article and understand Advanced Price Action Analysis  concept. Please join my Telegram Channel to learn more and clear your doubtshttps://t.me/tradingwithsmartmoney.

7 thoughts on “Advanced Price Action Analysis”

  1. Brother….God bless you abundantly…for sharing such vast knowledge in trading…
    I am also an aspiring day trader learning everyday….and I love intraday trading very much….
    I have not read a more comprehensive book than your website…

    Thank you once again!!!
    James Singh
    Bhubaneswar
    Odisha

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