Day Trading Price Action (How To Read Momentum On Forex & Stock Market)

What’s up Traders, in this article, we’re going to be talking about Day Trading Price Action (How To Read Momentum On Forex & Stock Market).

Hey guys, in this article, I will show you, how I read the price action in order to determine, if the bulls or the bears are in control of the market, and we’ll also try to establish the momentum of the market, by analyzing the bull and the bear candles during a trend. 

So, what is price action? Price action is a representation of a price movement on a given chart, and in its core it’s basically a representation of the behavior of the market participants, namely the bulls and the bears. 

 

Bulls moved the Market up/Bears moved the Market down

The bulls want to move the market up, and their strength is represented by upward bars, and the bears want to move the market down, and their strength is represented by downward bars. 

 

Determine if Bulls or Bears are in control of the Market

Every bar on a given chart is basically a battle between bulls and bears. When we read the price action on a chart, we don’t have to over analyze and complicate our trading, we just have to determine whether the bulls or the bears are in control of the market. 

How we do that? By analyzing the bull bars- the green ones, and the bear bars – the red ones. 

Before we begin, let me be clear on something, we will not look at candlestick patterns yet, we will look at much simpler and clearer clues. 

So, a market controlled by bulls is often characterized by the following bar patterns: 

First, then obvious one is that we have more bull bars than bears bars.

 

More Bull bars than Bear bars

 

• Consecutive Bull bars
• Green bars closing near their highs
• Wicks below the green bars
• Green bodies getting bigger
• Red bars are getting smaller

When he see this on our charts, this means that the bulls have more power and are increasingly moving the market upwards also, we will see consecutive bull bars. 

 

Consecutive Bull bars

Consecutive bull bars is a clear indication of a bullish momentum, In a bull market, the green bodies are bigger than the red bodies. When he see this on our charts that’s a signal that the bulls have more strength than the bears. 

 

Green bars closing near their highs

Also, during a bull controlled market, we will see the green bars closing near their highs. This suggests a good momentum on the upside, because the bulls are trying to maintain the prices higher. 

 

Wicks below the green bars

We will also see a lot of wicks below the green bars. This also represents a good signal that the bulls are in control of the market and that are trying to push the prices upwards. 

 

Green bodies getting bigger

When we see the green bodies getting bigger this signals a clear bullish momentum. This kind of price action suggests that the bears are unable to compete with the strength of the bulls.

 

Red bars are getting smaller

Also, during a market controlled by bulls, the red bars are getting smaller, as the bears can’t drive the prices down. Now, let’s look at the bar patterns for a market controlled by the bears. 

 

More Bear bars than Bull bars

 

• Consecutive Bear bars
• Red bars closing near their lows
• Wicks above the red bars
• Red bodies getting bigger
• Green bars are getting smaller

First, we have more bear bars than bull bars. This means that the bears have more power and are moving the market downwards. Also, we will see consecutive bear bars. 

 

Consecutive Bear bars

Consecutive bear bars is an obvious indication of a bearish momentum. In a bear market, the red bodies are bigger than the green bodies. 

 

Red bars closing near their lows

This kind of price action suggests that that the bears have more strength than the bulls. Also, during a bear controlled market, we will see the closing red bars near their lows. 

This price action suggests a good momentum on the downside.

 

Wicks above the red bars

We will also see a lot of wicks above the red bars. This represents a good signal that the bears are in control of the market and that are successfully push the prices downwards, despite the initial reaction of the bulls. 

 

Red bodies getting bigger

Also, when we see the red bodies getting bigger this signals a clear bearish momentum. This is a good indication that the bulls are unable to compete with the strength of the bears. 

 

Green bars are getting smaller

Also, during a market controlled by bears, the green bars are getting smaller and smaller. This price action indicates that the bulls can’t drive the prices upward.

Now that we know what to look at when we analyze a chart, let’s take a couple of examples. Here’s a bull controlled market on the EUR/USD

on the daily chart. 

For a better overview, we added a 50-period exponential moving average to gain a better perspective on the market.

Once the price action started to move in higher highs and higher lows, and the price stabilized above the moving average, the bulls took control of the market. 

We see consecutive bull bars, big body candles, green bars closing near their highs, wicks below the bars, green bars becoming bigger. 

 

Bull controlled Market

As long as the price continues to record higher highs and higher lows this should be considered a bull controlled market and the only trading scenario will involve buying positions. 

So only long positions during this kind of price action. Here’s a similar example on the pound/yen. The same price action: 

• Market starts to record higher highs and higher lows 
• Price action above the 50-period moving average, 
• Consecutive bull bars 
• Big body candles 
• Green bars closing near their highs 
• Wicks below the bars 
• Green big becoming bigger 
• Red bars getting smaller and smaller

 

Bear controlled Market

Here’s a bear controlled market on the EUR/USD. First we see the price action making lower highs and lower lows, as the price closes below the moving average. 

At this moment, the bears took control of the market: 

• Observe the consecutive red bars
• Big red candles 
• Bear bars closing near their lows
• Wicks above the bars 
• Red bars becoming bigger 

As long as the price continues to record lower highs and lower lows this should be considered a bear controlled market and the only trading scenario will involve short positions. 

 

Only short positions

In this example, after a strong move downwards, the bulls gained some strength and push the market above the moving average. At this point, this is no longer a bear controlled market. 

I hope you learned a few things from this that will improve your approach when you trade the market. 

Price action is about simplicity and by analyzing the market this way, you’ll have more clarity about the general outlook of the market. 

 

Final words

Okay, so that’s it I’ve come to the end of this presentation, I hope you’ve enjoyed it and if you really do please write a comment and click the share buttons smash it right, and click to subscribe bell to Allow notifications be updated.

Whenever, I publish content like, this and finally any questions or feedback let me know below and I’ll do my best to help, so with this guide, I hope you got value out of this presentation, I wish you good luck and good trading and I’ll talk to you soon you.

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