Technical Analysis: How to read the Price Action
Most traders have agreed to the school of thought that price action is all that matters in trading, as trading decisions are based solely and entirely on price. Technical analysts have tolled this line of argument, advising traders to disregard information on news headlines, economic, political and social determinants, since price action already incorporates all of the available information in itself. Technical analysts thus exhort traders to study the markets and ignore everything else thus gaining a strong focus on the only piece of information that matters, the price.
Critics argued that price action techniques do not reflect a consensus of opinion among market participants, insisting that fundamental analysis should be utilized and exploited but such analysis are not reliable, more time consuming and difficult. The indicators of technical analysis are used to evaluate price action patterns to generate buy or sell signals while price patterns are interpreted to identify the underlying strength of price movements. Technical analysis helps to identify the scenarios where the potential for a profitable trade is greatest (high winning-probability trade).