Bar by bar Price Action analysis – Part 17

Bar by bar Price Action analysis – Part 17
Bar by bar Price Action analysis – Part 17

How do you see the financial trading market? For me, it’s just like a jigsaw puzzle, in which the person who finds the most matching pieces will make the most profit. So in this article, I talk about the bar by bar price action analysis. This is the hardest part of Price Action trading but in return it will help you to avoid risks and make lots of profits.

A lot of traders have found ways to make bar by bar analysis easier from memorizing candlestick patterns, and price patterns to creating checklists.

Don’t mistake it for the holy grail. It’s simply a skill required of a Price Action trader that needs to be honed over a long period to be successful. I will try to give many simple examples for everyone to visualize the bar by bar analysis and its strength.

What is bar by bar analysis?

Bar by bar analysis does not mean taking all the candles on the chart seriously. That is, you do not necessarily have to assign a certain meaning to all candles.

What is bar by bar analysis?
What is bar by bar analysis?

But there is an immutable rule, which is that each candle can be an important link. That’s why we need to pay attention to each bar one by one.

It might only be important. That’s why we shouldn’t over-analyze. You can try to give each candle a meaning, but in the end, it will not be worth it and bring no benefit. The more you analyze it, the more confusing it becomes. In the analysis below, we will ignore quite a lot of candlesticks if it is not important.

Bar by bar analysis is:

  • Understanding what’s going on
  • Forming expectations for the future
  • Making the exact judgment of what is happening and seeing what is going to happen next.

An example using Price Action analysis of 20 consecutive candles.

In this chart, we do the following things.

  1. Pick a random segment of the market
  2. Focus on analyzing 20 candles
  3. Use nearby swing points to come up with an upcoming scenario

Overview price action in 20 candlesticks framed in the red box. Analyze each candlestick with Price Action.

Analyze each candle with Price Action
Analyze each candle with Price Action
  1. The price tried to hit the previous swing low but 2 consecutive candles closed as Bullish Pin Bar
  2. After the failure to push the price down, the market bounced back with 3 long lower tail candles. The upward trend was expected to continue shortly.
  3. Swing high rejected the upside with a clear tombstone Doji candle. Bulls lost.
  4. Two adjacent troughs were equal but higher than the first, indicating bullish momentum was still present. However, the price was stuck in a smaller and smaller range with enormous compression.
  5. A dragonfly Doji bar broke through the swing low but failed to close below and bounced back strongly, expecting the price to break out of the sideways zone and form an uptrend.
  6. A Morning Star candlestick pattern was formed, signaling a trend reversal from bearish to bullish.

In the picture below, the red zone is the one we just analyzed. Let’s see how the price has acted after analyzing to draw experience for yourself.

Next price action after analysis
Next price action after analysis

Next example

I still choose 20 more candlesticks to analyze based on previous swing points.

Analyze 20 consecutive candles by Price Action
Analyze 20 consecutive candles by Price Action
  1. Trend Bar candlestick appeared after trying to test swing low unsuccessfully.
  2. Another trend bar continued to touch the swing high area, which is also the Mother Bar candle.
  3. The Inside Bar candlestick cluster could not escape the previous Mother Bar candle. Then the price bounced off the low point of the Mother Bar candle, signaling a strong bearish momentum. But it could not overcome the swing low, showing that the buying power was still there. Thus, the bulls were still entrenched in the swing low area, preventing the price from falling further.
  4. There appeared the bullish reversal pattern – 3 three white soldiers. The upward momentum was not very strong because it failed many times when going to swing high.
  5. The appearance of the Bearish Engulfing candlestick pattern completely extinguished the previous uptrend. Accordingly, the price was likely to break down to the sideways zone to form a downtrend.

Next price action: you would see a huge drop in price after breaking out of the accumulation phase.

Price went as predicted after analysis
Price went as predicted after analysis

You can see we’re not making predictions about what’s going to happen next. We’re just reading what’s happening right now. From there, strategize for the next reasonable scenario. It can take a long time to do the bar by bar analysis at first. But once you get used to it, you will analyze and plan your trade properly in just a few minutes.

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Bar by bar Price Action analysis – Part 17
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