Your fundamental question you want answered is going to take you into an never ending quest and a colossal waste of time. It seems, that you want to understand the theory of price movement. Then construct your own strategy. However, you will encounter many theories: Demand vs supply...buying pressure vs selling pressure...herd mentality...institutional forces on the markets...sellers backing off..buyers backing off...sellers stepping up..buyers stepping up..insider trading...manipulation...mathematical operations and constructs...HFT...Algorithms...CEOS buying and selling their own stock...mergers...bankrupties...good news...bad news...prices cycles.....ad nauseum...
I will save you some time and effort. Every bar, (which is simply a graphical representation of price movement) on any time frame, forms BECAUSE there are bearish and bullish players on EACH and EVERY bar. The bears hope it goes south the bulls hope it goes north. The bears are trying to push it south the bulls are trying to push it north. Each are looking at fundamentals, or TA, or some sort of analysis, and some are just gambling. Some are quants and think math holds the secret to riches. Others are acting like idiots and just throwing money around. Some are just guessing. Others think they know. However, none of this matters and is a waste of time simply because you, nor anyone else, can EVER know all the variables that influence price movement at any given time. Think about it. Any news that comes out ...well...there is both a bullish and bearish interpretation of that news. Prices can go up on bad news and down on good news. Or down on bad news and up on good news. OR stay the same.
So, what matters is not WHAT causes price to move but the fact that price DOES indeed move. This important fact is followed closely by HOW it moves (i.e. the dynamics). That in turn is followed next by the PATTERNS it tends to form AS it moves. Once these things are understood then some strategies and things of a tactical nature can be devised, constructed, or simply observed that can allow a trader or investor to assess the probabilities, and thus give him an edge.
The markets are a sea of uncertainty and that uncertainty must be EMBRACED because that uncertainty is exactly WHAT gives the profitable opportunities to us. We try to make trading certain (by all our indicators...confirmation tactics..etc) but the market cares nothing about any of that. It is what it is. Period. No trade can EVER be 100% certain. Because the market IS an uncertain quagmire. However, it renders patterns that are tradeable. And those patterns are formed dynamically. Look at any chart. They are all the same. From 1929 to 2018. Ranges...channels...breakouts...spikes..gaps..trends..pullbacks..continuations...etc ad nauseum. It matters not that they were drawn by hand or by computer. Or dynamically formed by humans trading or formed by computers trading. If anything..they will be more precise when computer trading forms the patterns because emotion is a removed element, to some degree. It matters not “why” the patterns appear. What matters is that they appear and that they can be shown to be profitable by implementing the right strategies and tactics that render an edge.
Every tick that price moves, it moves for a reason. There is no such thing as noise. It is impossible to know all the reasons why the ES, or any other instrument, went up or down 1 tick in price. But the fact it DID is what matters AND THAT IS VALUABLE information. Charts are formed by ticks. Bars are formed by ticks. Patterns are formed by bars. Patterns tend to repeat. No market trends up or down forever. No market stays in a range forever. Prices levels are constantly being probed. It doesn’t matter the reason. What matters is that they ARE being probed and whether or not that probing ends up leading to price patterns that can be profitable. If the probe is successful then price will move in the direction of the probe. If not, it will go back to the area it was in and meander around some more or it may try a probe on the other end of the spectrum. Or it may try a second or third probe in the direction of the original probe.
The patterns tell the story of the pressures that were dynamically involved in forming them. The reason why is NOT important.
Some say volume is the only leading indicator. Others say price is the best indicator of price. None of it matters. What matters is what price actually does, and the patterns it forms as it does whatever it does, because those patterns, in certain contexts, can render an edge.
Remember, ranges (in different forms). Breakouts (in different forms). Channels (in different forms). Ranges again. Bo’s again. Channels again.
Channels are nothing but slanted ranges. The market is ALWAYS in a range..a channel..and a breakout, AT ALL TIMES. What may appear to be a channel on a 5 min chart may be a range on a 15 min chart. Or a BO on a 60 minute chart. None of that matters. What matters is there are patterns that can be traded when seen in certain contexts.
Good luck. IMHO Brooks deals with Price Action more comprehensively than anyone else. But that is my opinion. Others will disagree. If I were a novice..a beginner..a newbie..and wanted an education about PA I would spring for Brooks video course and his four books. The reason is that they are comprehensive, thorough, detailed, and serious. And very affordable for a Newbie. For around 650 dollars a trader can get all of them. Most gurus and pundits charge way more and many promise wealth and riches and surefire trading strategies. When you see or hear proven, surefire, easy road to riches, in a gurus ad...RUN AWAY as fast as you can.
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