THE

TRADING
FLOOR

PRICE
ACTION
WORKBOOK
TABLE PAGES 1-2
OF INTRODUCTION TO PRICE ACTION

CONTENTS
What is price action trading?
Reading price charts

PAGES 3-11
READING PRICE CHARTS
Candle element markup
Candlestick patterns and their meanings
Identifying candlestick patterns
Support and resistance levels
Market structure

PAGES 12-13
TREND ANALYSIS

Drawing trendlines
Identifying trends and trendlines

PAGES 14-19
KEY PRICE PATTERNS

Continuation patterns (e.g., flags, pennants)

Reversal patterns (e.g., head and shoulders,
double tops/bottoms)
Importance of pattern recognition
TABLE PAGES 20-32
OF DIVERGENCES

CONTENTS
Awesome Oscillator
Ultimate Oscillator
RSI or Stochastic RSI
TSI
MACD
Cumulative delta

PAGES 33-39
PRACTICAL APPLICATIONS: PRICE
ACTION STRATEGIES

Breakout trading
Breakout and retest
Pullback trading
Reversals
Continuations
Engulfing patterns and pin bars

PAGES 40-46
ADVANCED PRICE ACTION CONCEPTS

Multiple time frame analysis

Volume analysis in price action
Price action confluence
TABLE PAGES 47-51
OF PUTTING IT ALL TOGETHER

CONTENTS Price action tactics

Backtesting and forward testing strategies
Building experience and continuous learning
 WHAT IS PRICE
ACTION TRADING?

Financial markets produce data linked to the movement of

the price of a market over varying periods of time, and this
Price action trading is a fundamental strategy used by day data can be viewed on price charts.
traders to assist them in making decisions based on price
movement observed on a trading chart. This type of
strategy focuses primarily on market movement, as Price action is the analysis of
opposed to relying on indicators.
the price movement of a
The primary purpose of price action trading is to assess all
relevant information about a financial instrument reflected
market over time.
in its price. In interpreting price charts, traders aim to
identify various patterns, trends, levels of support and Price action provides a way to make sense of a market’s
resistance, in addition to other price-related signals in movement to help predict future movement with a high
order to make informed trading decisions. degree of accuracy.

WHY IS IT IMPORTANT?
Simplicity
Clearer charts
Understand why price is moving the way it is and where price is likely
to go to or reject from
Not having to rely on indicators, though they can still be useful and
compliment your understanding of price action and market structure

PAGE ONE
 READING PRICE
CHARTS
Candlestick charts provide a visual representation of price action and are used in price action analysis.

Candlesticks represent a specific time period, such as one hour or one day, and displays the opening, closing, high, and
low prices for that period.

The information presented by the candlestick is useful as it shows four price points: open, close, high and low

The body represents the open to close range

The wicks represent the extreme highs and lows

High High

Open of candle Close of candle

Extremes

Extremes
Close of candle Open of candle

Low Low

Each candlestick represents a period of time summarizing the data of orders executed during that specific period of time.

E.g., a 5-minute candle represents 5 minutes of trade data.

PAGE TWO
 Candle Element Markup

Mark up the elements of each candle:

Body and Wicks

Open / Close / High / Low

PAGE THREE
 CANDLESTICK PATTERNS
AND THEIR MEANINGS
Candlestick patterns play a crucial role in price action trading.

They can provide valuable price action information regarding potential

market reversals, continuations, and indecision.

For example, the "hammer" pattern is a bullish reversal pattern that

indicates a potential trend reversal from a downtrend to an uptrend.

PAGE FOUR
 PAGE FIVE
1.Bearish Engulfing, 2. Black Spinning Top, 3. Evening Star, 4. Bullish Engulfing, 5. Doji, 6. Inverted Hammer, 7. Dark Cloud Cover 8.
Hanging Man, 9. Three Line Strike 10. Shooting Star 11. Gravestone Doji, 12. Hammer
9
12 11 10
8 7 6 5
4 3 2 1
Identify candlestick patterns:
 SUPPORT AND
RESISTANCE LEVELS
Support levels are where the price regularly stops falling and bounces back up. When marking up support and
Whereas resistance levels are where the price normally stops rising and dips back resistance levels, you'll want to
down. target the areas where price
come to and reacts from the
These are strong areas where price may react from in the future. most rather than the farther
extremes where the wicks are
The higher the timeframe, the stronger the level of support of resistance. found.

Note: support levels often become resistance levels, and vice versa

PAGE SIX
 Marking up support and resistance zones from multiple timeframes can be helpful to gain a multi-timeframe
perspective.

Such as zones on the 1-hour and the 15-minute when trading on lower timeframes (e.g., 5m and 1m).

Draw out some of your own support and resistance levels:

PAGE SEVEN
PAGE EIGHT
PAGE NINE
 MARKET STRUCTURE
Market structure acts as a guide for understanding
upward, downward, and sideways (consolidation) trends
and is the simplest form of price movement in the
Market structure is:
market.

The flow of price from swing

There are 3 types of market structure:
highs to swing lows and vice
Bullish (higher highs, lower highs) versa. These same movements
Bearish (lower highs, lower lows)
Consolidation or Sideways happen on all timeframes.

Uptrend Downtrend Consolidation

PAGE TEN
 Test your knowledge of market structure by marking out support and resistance levels
as well as higher highs and lower lows in order to identify the overall trend on the
charts below:

PAGE ELEVEN
 DRAWING TRENDLINES
Trendlines can be drawn on a chart to help visualize the direction An upward sloping trendline, made up
of a trend by connecting a series of prices or points together. of higher highs and higher lows, the
points connected from low to low.
Understanding the direction of a trend is one of the best ways to
increase the probability of success when placing trades in the
market.
A downward sloping trendline is
They are a great way to help visualize where the market is comprised of lower highs and lower
headed, as well as determining certain areas of support and lows, the points connected from high
resistance. to high.

Bullish trendline

Bearish trendline

PAGE TWELVE
 IDENTIFYING TRENDS
AND TRENDLINES
Circle whether the chart is in an overall uptrend, downtrend or in consolidation and draw out your own trendlines:

PAGE THIRTEEN
 CONTINUATION
PATTERNS
Bullish continuation patterns:

Bullish flag pattern Bullish rectangle pattern Bullish pennant pattern

Bearish continuation patterns:

Bearish flag pattern Bearish rectangle pattern Bearish pennant pattern

PAGE FOURTEEN
 PAGE FIFTEEN
1. Bearish rectangle 2. Bearish Pennant 3. Bearish Flag 4. Bullish Flag 5. Bullish Pennant 6. Bullish Rectangle
6 5
4 3
2 1
Identify Each Continuation Pattern :
 REVERSAL PATTERNS

Bullish reversal patterns:

Inverse head and shoulders Double bottom Falling wedge

Bullish reversal patterns:

Head and shoulders Double top Rising wedge

PAGE SIXTEEN
 PAGE SEVENTEEN
1. Double Bottom/ W Pattern 2. Falling Wedge 3. Rising Wedge 4. Inverse
Head and Shoulders, 5. Head and Shoulders 6. Double Top/M Pattern
6 5
4 3
2 1
Identify Each Reversal Pattern :
 IMPORTANCE OF
PATTERN RECOGNITION
Chart patterns form shapes, which can assist in predicting potential price
breakouts and reversals.

Understanding and implementing chart patterns can help you to gain an edge
when it comes to your entry into the market.

Test your knowledge of continuation and reversal patterns on the charts below:

PAGE EIGHTEEN
PAGE NINETEEN
 DIVERGENCES
There are two types of divergences:

Hidden (continuation) divergences & Regular (reversal) divergences

What is a divergence?

In order for there to be a divergence, price must have created either higher highs, lower lows, a double top or double
bottom.

A divergence is when the price movement of an instrument is in the opposite direction of the movement shown in a
technical indicator such as an oscillator.

This can signify a reversal of trend or a continuation in price movement after a pullback.

Bearish divergences: Bullish divergences:

Bearish divergences signify potential downtrends when A bullish divergence occurs when price falls to a
price rallies to a new high while the oscillator refuses to new low while the oscillator fails to reach a new
reach a new peak. low.

Regular bearish divergence: Hidden bearish divergence: Regular bullish divergence: Hidden bullish divergence:

Price Price

Oscillator
Oscillator

PAGE TWENTY
 AWESOME OSCILLATOR
The awesome oscillator is a momentum indicator anchored around a zero line, displayed as a histogram that is
calculated with two simple moving averages; a 5 period moving average and a 34 period moving average.

Can you spot any of the divergences? Give it a try.

PAGE TWENTY ONE

PAGE TWENTY TWO
 ULTIMATE OSCILLATOR
The Ultimate Oscillator measures price momentum across three different timeframes: 7, 14 and 28 periods.
Unlike the RSI and Stochastic RSI, it doesn't flat line at the extremes.

For example, the Stochastic RSI reaching 100 will flat line, making it harder to spot divergence.

Can you spot any of the divergences? Give it a try

PAGE TWENTY THREE

PAGE TWENTY FOUR
 RSI OR STOCHASTIC RSI
The Stochastic RSI measures momentum in addition to identifying potentially overbought and oversold market conditions. It
compares the Stochastic oscillator formula to the RSI. The Stochastic RSI is preferred by some depending on their trading style
because it is more sensitive to short-term price movements and can provide more precise signals.

The RSI (Relative Strength Index):

Some traders prefer to use the RSI as it provides a longer history and can help in identifying potential trend reversals.

The RSI can be more useful in trending markets and the stochastic RSI is often more useful in sideways or choppy markets.

Can you spot any of the divergences? Give it a try

PAGE TWENTY FIVE

PAGE TWENTY SIX
 TRUE STRENGTH INDEX (TSI)
The TSI smoothes price changes to create a technical momentum oscillator that can identify trend continuations and
reversals.

It is also often used to identify when price conditions are potentially overbought or oversold, trend direction and
changes when crossing above or below the centerline.

PAGE TWENTY SEVEN

 Test your knowledge:
Can you spot any of the divergences? Give it a try

PAGE TWENTY EIGHT

 MACD
Moving Average Convergence/Divergence

The MACD is a trend following indicator that uses a 12 and 26 EMA to create both a momentum oscillator and aids in
visualizing the trend.
Divergences can be found both on the lines, as well as the histogram.

PAGE TWENTY NINE

 Try marking up some divergences on the charts below:

PAGE THIRTY
 CUMULATIVE DELTA
Cumulative Delta volume by LonesomeTheBlue is a free indicator on TradingView. It is a divergence spotting indicator
and is a leading volume spotting divergence indicator. It displays the difference in buying/selling pressure on candle
forms. Heikin Ashi candles can be turned on or off.

Additional settings commonly added are the 50 and 200 SMA as additional confirmations inside the indicator.

Try marking up some divergences on the charts below:

PAGE THIRTY ONE

PAGE THIRTY TWO
 BREAKOUT TRADING
A breakout occurs when an asset's price breaks above a
resistance level or below a support level after being
stuck in consolidation. You can also have breakouts Breakout
from chart patterns, such as double tops and bottoms.
These can signify a potential trade opportunity.

Breakout

Can you spot breakouts in the charts below?

PAGE THIRTY THREE

PAGE THIRTY FOUR
 BREAKOUT AND RETEST
A breakout occurs when an asset's price breaks above
a resistance level or below a support level after being
stuck in consolidation. Price will often come back to
the area where price broke out from for a retest before Breakout Retest

continuing.

Breakout Retest

Can you spot a breakout and retests in the charts below?

PAGE THIRTY FIVE

PAGE THIRTY SIX
 PULLBACK TRADING
A pullback is a temporary reversal in the direction of price before
continuing in the same direction of the overall trend.

The purpose of a pullback is often to gather liquidity before a larger move.

This can often serve as an entry for a trade.
Pullback

Traders will often use

limit orders or stop
entry order at these
levels to get in on the
trend.

The Fibonacci tool and

moving averages can
help you to spot
pullbacks.
Where can you spot pullbacks in the charts below?

PAGE THIRTY SEVEN

PAGE THIRTY EIGHT
 REVERSALS
A reversal is when the direction of a trend has shifted. This more
often occurs at levels identified as support and/or resistance.

These are common areas where traders either exit their trades or
enter into trades once they notice a reversal underway.

Reversal chart patterns can help in detecting the shift in the

trend direction.

Try marking up a couple reversal patterns

PAGE THIRTY NINE

 ENGULFING PATTERNS
AND PIN BARS
Bullish patterns:

Hammer Inverted hammer Bullish pinbar Bullish pinbar pattern Bullish three line strike

A pin bar candlestick has a long wick and a small body.

The body of a pin bar candle should be much smaller

than the size of the wick.

Bullish engulfing Tweezer bottoms Morning star A pin bar candlestick pattern visually shows when price
might reverse.

Bearish patterns:

Hanging man Shooting star Bearish pinbar Bearish pinbar pattern Bearish three line strike

Neutral patterns:

Dragonfly doji Doji Gravestone doji

Bearish engulfing Tweezer tops Evening star

PAGE FOURTY
 Test your knowledge by circling some patterns found in the charts below:

PAGE FORTY ONE

 MULTIPLE TIMEFRAME
ANALYSIS
Using multiple timeframe analysis allows you to gain an understanding of price action on higher timeframes to
identify the overall market trend while looking to the lower timeframe for entry. What may look like a downtrend on a
5 or 15-minute chart may actually be a pullback on a higher timeframe, such as the 1 or 4-hour chart. This means that
you need to be aware that the trend on a lower timeframe may end when the higher timeframe trend resumes.

This information can assist you in fine-tuning entry and exits points.

Daily trend direction bearish

Pullback

1-hour bullish trend

PAGE FORTY TWO

 Have a look at the charts below. The first is a 15-minute chart and the second is of the same chart on the
1-minute timeframe.

Identify the trend on the 15-minute chart

Identify the trend on the 1-minute chart
Identify on the 15-minute chart, the area of the 1-minute trend

PAGE FORTY THREE

 VOLUME ANALYSIS IN
PRICE ACTION
Understanding volume can be a valuable tool in your toolkit as it can help you make more informed trading decisions.
It reflects the total buying and selling activities at a given level in a market. You'll notice bars/a histogram located at
the bottom of the chart below, as well as two volumes profiles on the right side of the chart.

The height of each bar represents the total volume traded for a period of time. The taller/higher the bar, the higher
the volume traded during that period. High volume in correlation with price increase can suggest strong buying
pressure and the opposite for selling. Whereas if price continues to rise while volume remains low, this may signify the
weakening of price movement in a bullish direction.

Volume profile, as depicted below, can help identify support and resistance levels as higher volumes at specific price
levels is an indication of increased order transactions at that level. This higher transaction at this level indicates
potential for buyer/sellers to step back in when price revisits these high-volume areas.

Often times, low-volume areas area were price might come back to in order to transact.

Low volume

High volume

PAGE FORTY FOUR

 Can you spot where the volume information may have been useful in the charts below?

PAGE FORTY FIVE

 PRICE ACTION CONFLUENCE
List of Price Action Confluences: Try picking three different confluences that you
connect with best and make sure that they are all in
Price reacting to support and resistance levels alignment before entering into your trades.
Price respecting/rejecting/breaking a trendline
Price breaking out of a consolidation range By having set entry criteria, it will ensure that you
Price breaking out of a chart pattern wait for the best possible entries. Knowing what
Price reacting to a Fibonacci retracement level confluences you are looking for will allow you to
Break and retest enter into trades confidently.
Regular and hidden divergences

Confluences used in the chart below: Support and Resistance, Chart Patterns and Divergences

PAGE FORTY SIX

 PRICE ACTION TACTICS

Price action strategies utilize the Breakout Trading

Break and Retest Trading
analysis of price movements and
Pullback Trading (continuations)
patterns to identify potential Reversal Trading
opportunities in the market. Range Trading

EXAMPLES OF PRICE ACTION TACTICS AT WORK:

Breakout and Retest trading:

PAGE FORTY SEVEN

 Range Trading:

Breakout Trading:

PAGE FORTY EIGHT

 BACKTESTING AND FORWARD
TESTING STRATEGIES
Backtesting is key in order to be effective and consistent with forward testing.

Truly, any strategy can be profitable so long as you have a strong foundation, particularly when it comes to
understanding market structure and price action.

Backtesting will provide you with valuable information when developing your strategy, such as which days, session,
specific times, timeframes, pair(s), how much risk to reward to target, win rate, etc.

The more data you're able to accumulate, the more confident you'll be when it comes to entering into trades in the
live market - so long as you are consistent.

To begin backtesting select the calendar with the arrow at the Once selected, a calendar will appear.
bottom of the screen that is circled in pink.
Using the arrows to scroll back to the date you would like
to begin your backtesting.

PAGE FORTY NINE

 When you are on the date you'd like to begin backtesting, select
the replay feature and click directly on your chart.

From this menu you can choose the speed at which you
Since an integral part of backtesting involves journaling; you can
would like the candles to appear or you can choose for them
mark up your trade according to the criteria you are testing and
to appear one candle at a time.
then select the camera icon where you can then choose to either
copy the link to your chart image or copy the image itself.
There is also the possibility of backing up further on the
chart.

PAGE FIFTY
 BUILDING EXPERIENCE AND
CONTINUOUS LEARNING

From the TTF website, download the TTF Journal and choose a journal type from the bottom tabs. Begin adding all of your
backtesting data.

The more information you add and the more trades you log, the more precise your data will be and the more you can
learn about what works with your strategy.

Remain consistent when testing out your strategy so that you can make data driven decisions about stop loss size, risk
to reward, sessions to trade, pairs, etc., that lead to a more refined and successful strategy.

PAGE FIFTY ONE

NOTES
NOTES