Price action signal trading is mainly based on a few confirmations of trade setups in different ways such as breakouts from technical resistance areas, pullbacks or price action patterns, etc. .

Here's how to help traders know when to enter trades on price action signals.

1. Break out of chart pattern

This is one of the most common signals that a lot of price action traders use. See the chart below:

When price breaks the neckline of the head and shoulders pattern, price action traders can open a short position on the breakout.

Other candlestick or chart patterns are similarly used by them. However, professional price action traders will have additional combinations with other tools such as trendline or fibonacci,... for more confirmation.

2. The retest of support and resistance levels

Many price action traders trade on a retracement of a resistance or support level. You see the picture below:

The price returned to retest the previous support level. And here the price has shown a rejection signal, showing that this is a good trading opportunity where the price action trader can enter the trade.

3. Breaking the trendline

A break of a bullish or bearish trendline is also one of the signals that price action traders can enter a trade. Trendline breaks are seen as a signal of trend change. Once this change is confirmed, traders can enter in the direction of the breakout. You see the picture below:

4. Pullback Trading

This is one of the popular trading methods. Traders can either trade a pullback to follow the trend or trade a pullback after the break of a resistance level or a chart pattern.

As shown below is a pullback trade after the price broke out of the triangle pattern. The moment the price pullback to retest the previous broken resistance level, we can enter a trade.

Sometimes the market won't form a pullback for us, in these cases we don't even have to trade. It is best to wait for the correct setting that we need. The market will have many other opportunities for us.

5. Trade with the trend

Finally, how to trade with the trend. Considered a high probability method, the first step is to determine whether the market context is in an uptrend or downtrend.

In order to trade with the trend, traders will need to identify price zones where the market can correct before it continues moving in the direction of the main trend. And those are also the price zones that you should consider to trade.

You see the picture below:

The market was in an uptrend, but after a correction, the price created a bullish wedge pattern. The price then broke out of the wedge at the right level of 61.8 above the fibonacci. Once the breakout is confirmed, then we can also open a long position to enter the trade.