Context is everything. If I can read the context between buyers and sellers, in the long and short term, then I can better understand price action and the direction bias. Read the context to see where buyers are and where they take the price or can’t take price. See where sellers enter the market and where they too take or don’t take price.
Where are buyers? A good place to start is the obvious lows, higher lows. A means buyers liked that price and started buying, as buying increased price begins to move up. As price moves up it means sellers are not present or can’t stop the buying. Next would be to qualify a low and higher low. A low or higher low is only confirmed when a new higher high is established, so a new high confirms a new low.
Once an area has been identified as a buying area or buy zone or where buyers won the battle over sellers, this area represents a good place to buy should price return to it. However, when price returns to it and buyers do not hold it and price breaks through the buying zone then I should not expect price to increase since buyers are no longer buying in this area. This may suggest and or confirm sellers are now more dominant than buyers and expect price to move further down. For price to move up, a new ascending trend would need to be in place with sell areas being removed.
Price Action Trading 