logo
Blog Documentation The VIV Community Membership Login

6 Essential Price Action Patterns Every Trader Should Know

Price Action Is a Language 

Price action isn’t about memorizing hundreds of patterns. It’s about learning to read the story the market is telling. Each candle is a word, and each formation is a sentence. When you put them together, you understand where buyers and sellers are fighting — and who’s winning. The problem? Many traders either clutter their charts with indicators or memorize patterns without context. In this blog, we’ll cover six powerful price action patterns and, more importantly, how to interpret them correctly.

Learn. Apply. Trade Smarter with VIV →

1. Pin Bar (Rejection Wick)

  • What it shows: Strong rejection of a price level.
  • How to use it: Look for pin bars at key support or resistance zones, preferably with higher volume.
  • Trap to avoid: A pin bar in the middle of nowhere is meaningless. Always check context.

    • 2. Engulfing Candle (Momentum Shift)

    • What it shows: Buyers overpower sellers (bullish) or sellers overpower buyers (bearish).
    • How to use it: Trade only when an engulfing candle forms after a clear move — e.g., a bullish engulfing after a downtrend.
    • Trap to avoid: Don’t trade every engulfing bar blindly; small ones in choppy markets are just noise.

    3. Inside Bar (Consolidation Before Expansion)

  • What it shows: Temporary pause before a strong move.
  • How to use it: Look for breakouts in line with the trend or at major levels for reversals.
  • Trap to avoid: Inside bars during random sideways action don’t mean anything.

    • 4. Double Top / Double Bottom

  • What it shows: Price testing the same level twice, showing weakening momentum.
  • How to use it: Confirm with volume and a clear neckline break — otherwise, it could just be consolidation.
  • Trap to avoid: Many “double tops” fail because traders enter too early, before confirmation.

    • 5. Breakout with Retest

  • What it shows: Price breaks a key level, then pulls back to test it before continuing.
  • How to use it: Wait for the retest to hold before entering; this is where smart money often adds positions.
  • Trap to avoid: Don’t confuse every pullback with a “retest.” Strong levels are clear and obvious.

    • 6. Trendline Break with Strong Candle

  • What it shows: A clear shift in trend.
  • How to use it: Combine trendline breaks with major support/resistance for best results.
  • Trap to avoid: Weak breaks (small candles, low volume) are often fakeouts.

    • Why These Patterns Work (When Used Correctly)

    These aren’t magic signals — they reflect real buying and selling pressure. A pin bar shows rejection. An engulfing candle shows commitment. An inside bar shows indecision before a move. When you see these patterns in the right location — at major zones, in clear trends — they can be high-probability clues.

    Common Mistakes Traders Make

  • Trading patterns in isolation → ignoring structure, volume, or trend.
  • Forcing patterns → seeing “engulfing candles” everywhere, even when they’re weak.
  • Entering too early → not waiting for confirmation (neckline break, retest).
  • Ignoring risk management → even the best setups fail sometimes.

    • How to Take Price Action to the Next Level

    Learning patterns is just the start. The real skill is combining them with:

    • Market context → Where is price in the bigger picture?
    • Volume analysis → Are institutions participating?
    • Key zones → Are you trading into or away from demand/supply?

    Conclusion

    Master the Language of Price These six patterns aren’t just “shapes on a chart.” They’re messages from the market — showing who’s in control and where price might go next. If you’ve been overwhelmed by indicators or frustrated by false signals, strip your chart down and watch price action directly. Learn these patterns, study how they behave in context, and you’ll start to see trades with clarity — not guesswork. Price action trading is about understanding, not memorizing. These patterns are your alphabet. The market’s story is waiting — you just need to learn how to read it.

    X

    By Sunil Sethi
    Trading markets since 2016 | Swing & Positional trader | Price Action | Reversals
    Building clarity in the chaos of charts — blending tech leadership with market mastery.

    VIP - VERY IMPORTANT PERSON
    VIV - VERY     IMPORTANT VOLUME
    ⇢ BE A VIP WITH VIV ⇠

    Learn. Apply. Trade Smarter with VIV →