Price action is literally just that -- it's what's going on with the price, e.g. stock is up/down 5%. On the institutional side, price action can be across any time frame, but normally it is nearer (shorter time intervals).
You don't trade on the price action, because price action is just an indicator of something happening. You need to have a view before you place a trade, and there's not enough information in price alone to tell you what to do. Avoid thinking in terms of "buy the dip" or "fade the rally" and focus more on positioning and outlook. Alot of times a stock will start to move down before there is news, causing day traders to buy, and then an after market presser comes out that drives the stock further. Don't be stupid.
However, if you have a view -- e.g. company is poised to outperform (maybe because of a recent beat and raise, or the stock had been trading at a big discount to peers and you noticed a big fund started to buy in last quarter from their 13-f) -- you can take advantage of the price action.
What you'll realize is that it's very hard to randomly look at a stock seeing a price move. A better idea is to "cover" a series of securities (maybe 30-50 stocks, with 10 in depth and the rest depending on how they perform over a quarter, etc.), and respond to price action on those stocks that you have an existing view on.
You don't trade on the price action, because price action is just an indicator of something happening. You need to have a view before you place a trade, and there's not enough information in price alone to tell you what to do. Avoid thinking in terms of "buy the dip" or "fade the rally" and focus more on positioning and outlook. Alot of times a stock will start to move down before there is news, causing day traders to buy, and then an after market presser comes out that drives the stock further. Don't be stupid.
However, if you have a view -- e.g. company is poised to outperform (maybe because of a recent beat and raise, or the stock had been trading at a big discount to peers and you noticed a big fund started to buy in last quarter from their 13-f) -- you can take advantage of the price action.
What you'll realize is that it's very hard to randomly look at a stock seeing a price move. A better idea is to "cover" a series of securities (maybe 30-50 stocks, with 10 in depth and the rest depending on how they perform over a quarter, etc.), and respond to price action on those stocks that you have an existing view on.
