Price Action Setups

Price Action vs Indicators

Whereas indicators are based on what has happened n bars back, price action setups are based on what is happening now.

Price action trading setups focus on reading raw price (candlesticks + structure) without heavy indicators. Below are the most common, high-probability price action setups, how they form, and how traders usually trade them.

1. Pin Bar (Rejection Candle)

What it shows: Strong rejection of a price level.

Characteristics

Long wick (tail)
Small body
Tail rejects a key level (support/resistance)

Bullish Pin Bar

Long lower wick
Forms at support or demand

Bearish Pin Bar

Long upper wick
Forms at resistance or supply

Entry

Enter on break of the pin bar high (bullish) or low (bearish)

Stop Loss

Beyond the wick

Best Used At

Support/resistance
Trend pullbacks

2. Inside Bar Breakout

What it shows: Market consolidation before expansion.

Characteristics

Candle fully inside previous candle
Indicates compression

Entry

Buy above the inside bar high
Sell below the inside bar low

Stop Loss

Opposite side of the inside bar

Best Used In

Strong trends
Breakout environments

3. Engulfing Candle

What it shows: Momentum shift and strong participation.

Bullish Engulfing

Large bullish candle completely engulfs prior candle

Bearish Engulfing

Large bearish candle engulfs prior candle

Entry

On candle close or next candle break

Stop Loss

Below/above engulfing candle

Best Used At

Support/resistance
Trend reversals or continuations

4. Break and Retest

What it shows: Structure shift and confirmation.

Process

Price breaks a key level
Pulls back to retest
Resumes direction

Entry

On rejection at retest

Stop Loss

Below (bullish) or above (bearish) retest zone

Best Used In

All markets (forex, stocks, crypto)
Higher timeframes for reliability

5. Trend Pullback Setup

What it shows: Continuation in a strong trend.

Bullish Trend

Higher highs, higher lows
Pullback into prior support

Bearish Trend

Lower highs, lower lows
Pullback into resistance

Entry

Price action confirmation (pin bar, engulfing)

Stop Loss

Below swing low (bullish)
Above swing high (bearish)

6. Double Top / Double Bottom

What it shows: Potential trend reversal.

Double Top

Two failed attempts at resistance

Double Bottom

Two failed attempts at support

Confirmation

Break of the neckline

Entry

On neckline break or retest

Stop Loss

Above the highs (top) or below the lows (bottom)

7. Fakeout (False Breakout)

What it shows: Trapped traders and strong reversals.

Characteristics

Price breaks a level
Quickly reverses and closes back inside

Entry

Opposite direction after failure

Stop Loss

Beyond the fake breakout high/low

High-Probability Price Action Rules

✔ Trade at key levels, not in the middle
✔ Align with market structure
✔ Wait for candle confirmation
✔ Risk only 1–2% per trade
✔ Fewer trades = higher quality

Best Timeframes

Scalping: 1–5 min
Day trading: 5–15 min
Swing trading: 1H – Daily (most reliable)