Understanding Market Psychology Using Price Action

The beauty of price action is its enormous flexibility, and various application through different methods and strategies. It can be modified, restructured, can be back tested using programming skills. In this way Price action is not just a discretionary trading strategy, but overall fine tuning aspect which anyone can use and modify according to their ideas. We can create our own strategies by using Price action which fits our personality, Trading style and further characters.

Price action trading can be both discretionary and systematic which adds another dimensional advantage over indicators.In this article, I will clarify how to look at pure price action and guess the market psychology, using nothing but just a clear chart without any indicators

What is Market Psychology?
The overall sentiment market is experiencing at a particular time. Greed, fear, expectations and circumstances are all factors that contribute to the groups overall investing mentality or sentiment.

Just like a human being Market shows different kind of behavior and attitude on different scenarios and situations Greed, Fear, Panic, Euphoria are some of them.

Just by reading the price chart with logical and intuitive mind,We can understand the situation or behavior that market is exhibiting at present and possibly anticipate what it might do in the near future

Reading Market-psychology through Price action:

 
Price action provides an open window for us to look through and understand the market psychology; of course in the beginning it might be complex and perhaps quite difficult, not impossible.As with every skill’s it takes time and experience to do so.

Steps to understand the Market psychology using Price action:
Step 1: Open a clear chart take out all the indicators
Step 2: Mark the chart wherever you feel it is necessary using your mind
Step 3: Try to guess the Market’s thinking behind the move
Step 4: Anticipate the Next move using intuition

Lower time frames will give much more exposure to patterns,but the time for contemplation is reduced. Above all, you want to pick a time frame that will allow you to make an unfailing commitment to this exercise. Doing it for a few days and then giving up will result in nothing but wasted time.Do not underestimate the power of this simple charting exercise.