In order to understand price action, you need to learn how to read charts. Its focus is on Japanese candlestick charts, a topic that will be discussed more fully in the next lesson.

2.1 Candle chart analysis and its significance

Calculating the strength of support and resistance levels is an essential ability to successfully predict price movements. This lesson will show how a trader can identify specific support and resistance factors or signals after understanding why prices may be moving in a particular direction. The pattern based on the candlestick chart will suggest at what price the currency pair should be sold or bought.

2.2 Understanding how prices work

To evaluate the strength of a given support/resistance, and then judge whether the exchange rate will break through it, it is very important to observe how the support/resistance meets the "IRATE" standard. IRATE is a combination of four indicators: "number of indicators (I)", integer (R), time span (A) and number of tests (TE). These four factors determine the possible strength of the support/resistance level.

2.3 Example of a price run

So far, we have discussed the pattern analysis of a single candlestick chart. What we want to explain in this lesson is how to explore the price changes in a longer period of time through the short-term price trends displayed on the K-line chart. The continuous arrangement of specific types of K-lines constitutes the so-called "K-line patterns". The process of identifying, confirming and using these patterns is called K-line analysis, and this is the basis for realizing profitable transactions one. K-line analysis also has an alias called price action analysis, which is more important than analyzing only the price itself. Also more effective.

2.4 Inference

In this lesson, you will step by step review the K-line chart analysis and support and resistance knowledge you have learned so far through the real historical EUR/USD K-line chart.