How to read the price action pattern?

<p id="isPasted">To read a price action pattern, analyze the chart for the direction of the trend by looking for a series of higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend). Then, identify specific candlestick patterns and chart formations to predict potential continuation or reversal, using tools like support and resistance lines and checking for confirmation from subsequent price action. &nbsp;</p><p><strong>1. Identify the overall trend</strong></p><ul><li>Uptrend: Look for the price to form a series of higher highs (HH) and higher lows (HL). This indicates buyers are in control.&nbsp;</li><li>Downtrend: Look for the price to form a series of lower highs (LH) and lower lows (LL). This suggests sellers are dominant.&nbsp;</li><li>Consolidation: The price moves sideways within a defined range, creating equal highs and lows. This can indicate indecision in the market. </li></ul><p><strong>2. Analyze candlestick patterns</strong></p><ul><li>Candle body and color: A green or white candle (bullish) shows the closing price was higher than the opening price, while a red or black candle (bearish) shows the opposite. </li><li>Wicks (shadows): The lines extending from the body show the highest and lowest prices of the period. Long upper wicks can indicate selling pressure, while long lower wicks may signal buying support.&nbsp;</li><li>Common patterns: Look for well-known formations like the engulfing pattern, Doji, or Harami cross, which can signal potential reversals or continuations. </li></ul><p><strong>3. Look for chart patterns</strong></p><ul><li>Continuation patterns: These patterns, like flags or rectangles, suggest the trend is likely to continue after a pause.&nbsp;</li><li>Reversal patterns: Patterns such as double tops (M shape) or double bottoms (W shape) can signal a potential change in the existing trend.&nbsp;</li><li>Bilateral patterns: These are indecisive patterns where the outcome could be either a continuation or a reversal. </li></ul><p><strong>4. Confirm the pattern</strong></p><ul><li>Wait for confirmation: Instead of trading immediately, wait for a few more candlesticks to see if the price action confirms the pattern's prediction. For example, if a bullish flag pattern breaks its resistance, wait to see if the next couple of candles continue to move up.&nbsp;</li><li>Use support and resistance: Identify key support and resistance levels on the chart and see if the pattern is interacting with these levels. A breakout from a pattern at a strong support or resistance level can be a more reliable signal. </li></ul><p><br></p>