I don’t know how you feel, but it seems every time I read a headline that should be negative, the market pops up. Then again, recently, whenever you see a positive headline, the market goes down. Have you ever wondered why it’s doing that? Is the market just trying to trick everyone and turn them into losers, or is something more important at play? Obviously, there’s no shortage of opinions on the subject. However, as traders, it’s critical to filter out as much noise as possible to make objective decisions when entering a trade.
This is where price action shines. If you simplify the market—past the headlines, rumors, and narratives—the fact is that the market is simply buyers and sellers. That might sound like an oversimplification, but it’s the core reality: buyers and sellers. When you’re shopping, which is essentially what you’re doing when entering a trade, you’re looking for specific things, much like when you shop for groceries or clothes. You’re looking for certain price points. Once you find the right setup—say, the right food or clothing at the right price—you buy. The difference is that you’re not expecting your groceries or clothes to increase or decrease in equity. However, you use the same skills and thought process to make an educated decision about what you’re willing to purchase.
Early on the morning of the 23rd of May President Trump announces a 50 percent tariff on all EU imports due to stalled negotiations effective June 1st. However after two hours in the pre-market buyers stepped in and the market rallied just about the entire move on a Friday no less and were willing to take that risk into the weekend. Price reached support and buyers stepped in and were willing to take it into what was at that time resistance.
On the 28th of May $NVDA ( ▲ 1.33% ) reports earnings and were a beat on top and bottom line with no shortage of clients for their products. Price dipped down to 133.30 (where buyers were) and topped out at 143.84 in the pre-market. Traders on the 29th would have certainly expected a dip buy and continuation however NVDA failed to push past 143 and closed the day at 138.00 on the 29th. It saw further declines then next day dipping all the way down to you guessed it 133.00. Price rebounded from where buyers were before and as of the writing of this article closed at 141.22.
As traders, we’re trying to find places to buy or sell where others are most likely to be buyers or sellers, joining the wave of price momentum in our chosen direction. Indicators may help inform decisions, but price is the most important factor when entering a trade.
Price action allows us to eliminate the clutter of lagging indicators and focus on raw data, reducing complexity in decision-making. The best thing about price action is its universality across markets, whether you trade stocks, forex, commodities, or crypto. It also transcends timeframes, whether you trade intraday, daily, or weekly charts. Price action shows where the price has been and where it’s most likely to go.
These are the things I remind myself, especially in today’s market, when I hear a headline and form a perception. The first place I look is the price of the asset I’m considering and where it’s most likely to go. The less bias I apply to news, the more likely I am to execute a trade that aligns with my risk parameters.
