Price action is such a popular trading concept because of its simplicity. When it comes to applying price action to charts and making trading decisions based on price formations, there are a handful of principles that can help you make more sophisticated calls and avoid some of the most common pitfalls.[bctt tweet=”Price action. Can chart formations provide precise or almost precise entries and exits? https://www.optimusfutures.com/tradeblog/archives/price-action-can-chart-formations-provide-precise-or-almost-precise-entries-and-exits/ “]
Chart formations vs. Candlesticks
First, we have to be clear what price action and price formations are. Chart formations are made up of many candlesticks or price bars and form certain patterns. On the other hand, candlestick price action traders only focus on a very limited amount of candlesticks to form an opinion – usually not more than 3 candlesticks at a time.
It is important to understand the connection here; an inside bar candlestick formation is made up of a larger candlestick followed by a smaller