Introduction
Price action trading focuses on interpreting raw price movement rather than relying heavily on indicators. At the core of this approach are support, resistance, and key levels, which provide traders with reliable entry and exit signals.
Support Levels
Support is a price level where demand is strong enough to prevent further decline.
- Price bounces from support = buying opportunity.
- Break below support = potential bearish continuation.
- Tip: The more times price tests support without breaking, the stronger the level.
Resistance Levels
Resistance is the opposite of support—it’s a level where selling pressure prevents further upward movement.
- Price rejection at resistance = selling opportunity.
- Break above resistance = bullish continuation.
- Tip: Combine resistance with candlestick patterns (e.g., pin bars, engulfing candles) for confirmation.
Key Levels in Price Action
Key levels are significant zones where price has historically reacted. These can be:
- Round numbers (e.g., 1.2000 in EUR/USD).
- Previous highs and lows.
- Major trendlines and channels.
Key levels often act as magnets where traders place stop-loss and take-profit orders.
Conclusion
Support, resistance, and key levels are essential concepts in price action trading. By identifying these zones and watching how price reacts around them, traders can make more accurate predictions and manage risk effectively—without relying on too many technical indicators.