How To Use Price Action Flows From The Chart
Correctly analyzing price action flow is a key part of understanding the path of the least resistance. By knowing whether the price swing is behaving impulsively or correctively, traders can create a strong edge when reading the charts.
This article explains the role of price action in the path of least resistance, shows the four types of price action, explains impulsive and corrective price action, and introduces the concept of energy versus gravity.
Price Action Flow in Path of Least Resistance
The flow of price action is key for analyzing the path of least resistance. Equally important is the concept of resistance. Here is how it works: the strength of the resistance versus the strength of the price flow will determine the path of least resistance for price on any Forex or financial chart.
Simply said, both resistance and flow are in a constant battle and the outcome impacts the price path as follows:
- Stronger price flow will beat weaker support or resistance.
- Weaker price flow will lose versus stronger support or resistance.
Our “path of least resistance” articles examines this concept in fine detail. Today’s article, however, focuses on how to actually measure the flow of price action.
The resistance part has already been reviewed in detail via our Ultimate Guide on Support and Resistance (S&R). It provides a deep overview of how to determine S&R, what tools and indicators to use, how to use S&R and much more. Now it’s time to analyses the flow of price action.
The 4 Types of Price Action
It is important to know that strong price movement is called impulse or momentum whereas weak price action is known as corrective or consolidation. The strength or weakness of price flow can be understood by analysing whether price is behaving impulsively or correctively.
Both strong and weak price action can take place during bullish and bearish price movements, which is why they are sometimes divided into bullish and bearish price action movements. Simply said, impulse and corrections forex can be either bullish (price is moving up) or bearish (price is moving down). This creates four different types of price movements, which in some ways can been seen as “DNA” or heart beat of the market:
- Bullish impulse
- Bullish correction
- Bearish impulse
- Bearish correction
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| How To Use Price Action Flows From The Chart |
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