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The Value of Price
A fundamental principle of price action trading is that some candles are more valuable than others during the price analysis process.
By "more valuable," I mean that certain candlesticks carry greater weight in the price analysis process than others. Before I explain which candles have greater intrinsic value, allow me to explain a bit about price action theory.
The price action trader believes that the price of an asset or the market in general is a living, breathing entity.
Similar to you and I, market movements vary from day to day, and past behavior cannot be used to predict future behavior. However, just like you and I, it is much easier to predict the future behavior of a living, breathing entity by analyzing its recent behavior.
If I were to predict your next move, it would be much simpler and more practical for me to analyze your recent behavior rather than your behavior from two years ago.
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Consequently, this core philosophy largely dictates how values and prices can be established. In terms of the analysis process, the current price is more important than the historical price. In price to predict the future direction of the price of an asset, it is prudent to analyze the current price rather than the historical price, due to the fact that historical price carries less weight in the analysis process. So, if your analysis of price over the past three months indicated that price will rise in the future, but this week's price analysis indicates that price will fall, the price action trader will not hesitate to sell as dictated by their analysis of current price.
Therefore, the next time you are confused about the future price direction due to conflicting signals, consider the following. What does the current price tell me about the future direction of the price? Past prices should remain where they belong: "in the past."
That's it!
Have a great day!
