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Nial Fuller

NIAL FULLER
Professional Trader, Author & Trading Coach

How Price Action Tells The “Story” On The Charts

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By in Forex Trading Articles Last updated on | 58 Comments

Brain wavesEach week, I get hundreds of emails from traders asking things like “Nial, what do you think of this signal?”, or “Nial, is this a good setup?” What questions like these tell me is that many people are looking at the market the wrong way; they’re looking at one price bar or signal and working from there, when they really should be looking at the overall story the market is trying to tell them and the “emotion” of price.

When I say the “story” of the market and the “emotion” of price, I mean that price literally does reflect market participants’ emotional actions in the market, but also that price action almost takes on a “personality” of its own and tells a “story”. Just like a human personality, price action has both consistency to it as well as volatility and randomness, it also has little idiosyncrasies that can vary between markets. As a trader, you need to get in-tune with the “personality” of each market that you trade by reading the story told by its price action.

Price action tells the “story” of the market

The market is like a book; to understand what is happening in it you have to read it on a regular basis and keep it fresh in your mind, otherwise you’ll fall out of touch with what’s happening in the story. The price action of a market tells the market’s “story”, and by learning to read it you can begin to anticipate the next series of events, just as you can in some books. The best traders are essentially “in the zone” because they keep daily tabs on what the market is doing and they understand the “story” being told by the market’s price action.

Don’t get me wrong, you don’t have to be “obsessive” about watching the charts, but there is a fine balance you need to find between analyzing the markets too much and not analyzing them enough. The only way to truly master your trading strategy is to “read” the market on a regular basis, even if it’s only 10 or 20 minutes a day, you need to stay in touch with what is happening the market if you want to really increase your chances of making money over the long-run.

Mapping the market’s story

Keeping up with what is happening in the market will help you to understand the story the market is trying to tell you and will help keep you stay in-tune with it. Having an on-going journal or dairy is the best way to “map” the market’s story each day and will help you to understand the market’s story from “cover to cover”, it will also help you build your market intuition. Intuition and gut feel will develop in a huge way from this exercise of diarizing your thoughts on the market each day– consider it an exercise that will allow you to “feel” the market on a daily basis.

The best way to go about doing this is just to keep your own daily journal of the market by making notes about each pair you trade. You would include things like daily chart trend direction, key chart levels, key signals that have formed recently, etc. It’s not hard to get started with this; go to the supermarket and buy a pad of paper and a pencil and each day you should write the date, which pair or market you’re analyzing and then make a few notes like we just discussed. The point is that you’re making the process of keeping up with the market’s “story” a daily habit.

Essentially, by doing this you’re getting in-touch with what’s happening in the market and you’re preempting a potential entry signal. What I mean by that is, after you’ve made your notes about the market and you are in-touch with what it’s doing and where the key levels are at etc., it then really should just be a waiting game. You want to be prepared, and you get prepared by following the market each day and staying in-touch with the story the price action is telling you…by keeping this daily journal you are essentially writing a daily “guide-book” to the market. I personally noticed a huge improvement in my trading when I started writing a market commentary each day starting about 5 years ago, you don’t have to put in an as many hours as I do taking care of a big audience, you just need to diarize the major events in the markets that you follow each day. Realistically, this shouldn’t take more than 10 to 20 minutes per day after you know what you’re doing.

Anticipating trades

anticipateOnce you’ve started writing your own daily market commentary and journaling about your favorite markets, you can use this information to be more anticipatory. When you make a daily journal or commentary of the markets, you are really creating a dialogue in your head about what has happened in the market recently, what is happening now, and what MIGHT happen next. Creating this inner-dialogue about the market is essential to developing your trading intuition and “gut” trading feel…these are the intangible things that really allow humans to excel over computers at trading.

For example, in your daily notes about the market you’ve recorded what’s happened; found the trend, found the key levels, etc…and then you’re just anticipating a price action trading signal to enter the market from. To use the sniper analogy that I use in many of my articles; anticipating a signal is sort of like the sniper picking the spot he will snipe from and what he will rest his gun on, then after finding the prime spot, he gets into position and waits for his target to enter the crosshairs of his gun. This is basically what you are doing when you make a daily diary of what’s happening in the market; you’re getting familiar with the market’s price action and current conditions and then once you have this bias and “story” down, you can simply wait in anticipation of an entry signal that makes sense with your market bias. I can promise you that if you do this you will be FAR ahead of most other traders out there who are bleeding money every week because they are unprepared and undisciplined.

One of my good trading friends is always saying that “trading is an anticipatory game”, and I tend to agree with him 100%. For example, imagine you’re looking at the EURUSD and you notice it’s having a lot of trouble breaking through a certain level, you record what’s happening in your trading diary and you form a view and a bias on the market, then you can begin to anticipate an entry signal that agrees with your bias. Once you have your view and bias and then a signal forms that makes sense with it…you should have 100% confidence that the signal is valid because you’ve pre-empted it…this takes all of the potential second-guessing out of your entry strategy and it’s really HOW you master your trading strategy.

You may have heard of traders being “in the zone”…well diarizing your favorite markets and learning to anticipate signals from the story the market is telling you is HOW you get in the zone. By keeping a daily diary of the markets you trade you will essentially be “immersing” yourself in them, like getting a stuck in a good book, this will help you to understand the emotion of price and get in the “trading zone”.

See the “forest for the trees”

A lot of people pay too much attention to one bar or one price action signal. What you need to do is take into account not just the price action setup you’re considering trading, but the overall market context that it has formed in. As we said above, if you keep an on-going diary or journal of your favorite markets, you will already have this context and you’ll just be waiting for a signal to form. Unfortunately, most traders do the opposite; they don’t really have any structure or routine behind their trading analysis and so they have no real informed market bias, instead they are solely focused on finding a signal with very little regard to what the surrounding market is doing.

Also, it’s easy for a trader to overlook the bars that aren’t specific entry signals, but you still need to note these bars…each price bar is important, especially on a 4 hour or daily chart (higher time frames). Tails on bars are important for example, any bar with a large tail is obviously important because the tail signals exhaustion and a possible move in the opposite direction…even if it’s not a pin bar, a bar with a long tail is important.

The point is that we don’t only use price action signals to trade from, we also use the surrounding price action to read the chart and figure out where it’s likely to go next.

Closing

Following the market on a daily basis is important if you are serious about making money as a trader. It’s very similar to reading a book; if you put the book down for a week or two you will probably forget where you left off and what was happening. When it comes to trading, this can mean losing money because you are less prepared than you otherwise would be if you were following the market every day and diarizing what the price action is telling you, like we discussed above. Thus, if you do need to take a break from the market for a week or two, like we all do sometimes, give yourself another week or two to get back into the “groove” of what is happening before you go placing any live trades. Let’s be honest, most traders do not turn the market into an on-going story that they stay in-tune with, instead they just randomly enter trades on a whim with no logical supporting process behind their trading decisions.

Once you get into the habit of diarizing your favorite markets, you will essentially be setting yourself up like a “sniper” and then all you have to do is just wait each day for your “prey” to walk in between your sights. By reading the market each day and recording what you see, you will begin to anticipate signals…this is called developing your “gut” trading feel, “intuition” or “discretionary” trading sense…whatever you want to call it, it’s what passionate traders do and any professional trader has an internal on-going storyline of what their favorite markets are doing at any given time…they don’t just “wing it”. If you want to learn how I trade with price action and read my daily members’ trading commentary which is essentially my daily diary of what the markets are doing, then checkout my price action trading course for more information and insight.

About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 20,000+ students since 2008. Checkout Nial's Professional Forex Course here.
  1. Naomi Mfalila July 9, 2017 at 7:24 pm

    Hello Nial,

    Nice article, thanks.
    I wanted to ask what about the fundamental aspect of things? I mean price action is one thing but how do you make an entry decision based on old market data when something in the news can significantly turn the trend?
    I will really appreciate a response from you.

    Thanks

    Reply
  2. naveen August 29, 2013 at 7:57 pm

    Dear guru, I am fortunate to have you as my mentor. So far I was concentrating on the Signal bar. From today onwards, I am going to start writing the daily notes. The key is to write the commentry by hand instead of typing in computer.

    Thank you once again.

    Reply
  3. ada May 12, 2013 at 6:16 pm

    thanks Nial you are really doing a great job

    Reply
  4. Udoaka May 6, 2013 at 11:04 pm

    Thanks Nial, for making me look serious by not ignoring the obvious!

    Reply
  5. Abiodun April 28, 2013 at 6:23 am

    Nail, thank you very much for article. I am very fortunate to have you as a mentor. Thanks so much.

    Reply
  6. Andrew April 12, 2013 at 9:07 am

    Very important article.

    Reply
  7. david April 6, 2013 at 1:02 am

    nail long time you are wonderfully good in this business , thnks a lot bye david

    Reply
  8. Samuel April 5, 2013 at 1:27 am

    I think you are the best and most truthfull one I have ever met in my forex history. Thanks for yoir exposition

    Reply
  9. Farrakh Gilani April 4, 2013 at 10:20 pm

    Thanks Nial,for another great article. I have been doing this for few months now, every day when US market close i spent about 20 minutes to write my diary and then compare with your commectry next day before i check the market again and it has helped me a lot to understand the market price movement. God bless you for helping us to learn, how to trade.

    Reply
  10. Farrakh Gilani April 4, 2013 at 10:15 pm

    Thanks Nial, it is great article like always. I have been doing this for few months now and i totally agree with you. It helped me a lot. I do this on daily basis,it takes about 20 min every day when US market close and next day i compare my notes with your before i check the market again and it is great way to learn about the markets. Thanks again and God bless you.

    Reply
  11. slivester April 4, 2013 at 1:45 pm

    great nial…..well done…..tq

    Reply
  12. tim April 3, 2013 at 2:06 pm

    I think this is the best article yet!. Price action means everything in technical analysis. You simply cannot become a good trader without it!. Well done Nial!.

    PS. As Ryan has suggested. I think you should write a book. I would definitely buy it.

    Reply
  13. Mohd Amin Bin Mohd Esa April 3, 2013 at 9:46 am

    I love this article .it makes alot of sense.thank you nial.

    Reply
  14. Mehdi April 3, 2013 at 5:08 am

    Hi Nial,
    Always strategic and critical points. Thank you very much and long live man.
    Best wishes and regards

    Reply
  15. olatunde April 3, 2013 at 4:03 am

    I guess this is the ‘spirit’ of trading which will bring to life[profitability] to many of us who have been following you!
    You are actually the best traders’teacher I have ever come across!!
    Keep it up.

    Reply
  16. john naluswa April 2, 2013 at 11:59 pm

    For me you are the best mentor in forex that I have come across. Each of your articles is a gold mine. If and when I get to the level of trading that I aspire for, it will be mainly because of you, and I will owe it to you.

    I really appreciate your efforts in helping others.

    Reply
  17. Peter Miller April 2, 2013 at 10:31 am

    As Tina Turner would say Nial you are “Simply the best”
    There is no one else as good a mentor as you
    Thank you for making me who I am today
    Regards Peter Miller

    Reply
  18. lyte April 2, 2013 at 6:44 am

    Thanks Nial. Just awesome!

    Reply
  19. Sam April 2, 2013 at 4:00 am

    As Iam busy laying my foundation to the forex markets
    It is getting stronger and stronger everyday with the informative artticles you are publishing

    Thanks Nail
    keep up the good work

    Reply
  20. Tshepo April 2, 2013 at 2:59 am

    Thank you for another reinforcement, Nail.

    Reply
  21. felix April 2, 2013 at 2:57 am

    Nial,
    Very good article
    Thank you

    Reply
  22. jennifer April 1, 2013 at 7:10 pm

    thank you Nial, now i know ehy i have been losing money, am very grateful

    Reply
  23. AYODELE April 1, 2013 at 6:29 pm

    Nial you are right.I started doing it sometimes ago but i stopped because I didnt know it was such an essential skill.However with this article I will go back to that practice again.Good trading to you all

    Reply
  24. KRISTOFA OKENTA April 1, 2013 at 5:01 pm

    My obvious problem before now has been keeping trading journal consistently. Now I can confidently have and track my markets using a diary journal. I have good understanding of it now after following the ‘Professor’ for some time now.
    I am sincerely grateful to you dear Nial for all your articles.

    Reply
  25. Ryan April 1, 2013 at 1:08 pm

    As usual, your post is brillian. Thanks.

    One suggestion : Take all the articles you have on this site and publish it into a book.

    Reply
  26. Res April 1, 2013 at 9:27 am

    Ah, that’s where I have been going wrong for the past five years!!!
    No, seriously Nial, You hit the nail right on the head mate, yet again! and you are absolutely right.
    Many thanks for sharing it with us.

    Reply
  27. bernard April 1, 2013 at 6:23 am

    Thanx for this tip, I’m new to this and excited with having this tip,

    Reply
  28. Mithun April 1, 2013 at 2:04 am

    Very good article Nial !! You explained the should do things which any forex professional trader should do !!

    Reply
  29. damola March 31, 2013 at 8:27 pm

    About time I get that diary, thanks Nial!

    Reply
  30. Novbli March 31, 2013 at 6:11 pm

    I agree with you Nial. For me autotrading or the like is not a good solution. There is no holy grail in forex system. We must use our head everytime we open a trade

    Reply
  31. Ramli M.S March 31, 2013 at 5:47 pm

    Thanks

    Great talks.

    Cheers

    Reply
  32. PERI March 31, 2013 at 4:48 pm

    Very good educative article ! Thank you My Dear Master !

    Reply
  33. rajiv March 31, 2013 at 4:33 pm

    Hi Nial,
    This article is ausumn, and the best part of it was giving importance to each price bar and its characteristics(higher time frames),
    Of course we have to agree that each individual bar is trying to tell us how the market is reacting to emotions of market participants.

    Regards
    Rajiv

    Reply
  34. Ravi March 31, 2013 at 2:53 pm

    This is working really… I always found it boring early, but later, this became the most important aspect.

    Reply
  35. Cyndi Scherer March 31, 2013 at 1:31 pm

    I have tried to do a daily journal but didn’t really understand what it was about. This article explained it beautifully. Thank you

    Reply
  36. alanw March 31, 2013 at 10:42 am

    Hi Nials, another well researched , prepared artical, happy Easter weekend in Q/land.
    cheers A

    Reply
  37. rayh March 31, 2013 at 10:07 am

    Just brilliant many thanks Nial.

    Reply
  38. Jyoti March 31, 2013 at 10:04 am

    Hi Neil
    Good stuff. Very simple tip to be in the zone and to wait for the right set up. It is amazing how you make it sound so simple.
    Thanks
    Jyoti

    Reply
  39. Odwa Mazwi March 31, 2013 at 6:05 am

    Thanks Nial i will try it as well

    Reply
  40. Manfred March 31, 2013 at 1:19 am

    Very interesting insights in Forex trading.

    Nail knows what he is speaking about.

    Reply
  41. Oska March 31, 2013 at 1:03 am

    Thanks Nial,

    im at the moment exactly at that point you described in your article. Understand first what the market is, how it breached, think and feel, then if clear PA is there on market relevant levels enter without doubt and emotions. BTW, its really good to have your daily commentarys, so i can update my learning progress with your view.

    cheers
    Oska

    Reply
  42. Darrell J March 30, 2013 at 11:55 pm

    Definitely stay in tune with the market.

    Reply
  43. Henry March 30, 2013 at 11:01 pm

    Thanks a lot for this valuable lesson!

    Reply
  44. MattK March 30, 2013 at 9:54 pm

    Hey Nial,

    Thanks again!!!

    What I do is I copy and save your daily/weekly charts for each pair.

    Than I print it out on the top third of a page. I might add some additional levels or notes to the chart. Then each day I write a few lines, by date, underneath on the empty part of the page. I’ll use the back of the page as it fills and will print a ‘new’ chart as I see fit.

    So I have a small pile of pages next to me and each day I’ll go through them and add notes, add notes or ideas that I read in your daily column or in the forums.

    You could do this electronically as well–but I still prefer paper!!

    Cheers,

    MattK

    Reply
  45. jaykay March 30, 2013 at 9:49 pm

    Thanks for the timely reminder. Yes thats what we should be doing and doing with a specified number of counters. I do a daily take every day, few hours after the US Close. And it really does not take very long. I only trade Daily or 4 hr charts….yes your precription whch I have found very useful. Have Good Week.

    Reply
  46. Richard March 30, 2013 at 9:48 pm

    Hi Nial,

    I thought you left school without furthering your education, well from what I have read today, one would have thought you had at least received a degree in psychology or been to MIT
    or perhaps one of the Aussie equelevents.

    This is one of the best articles that I have read about trading.

    Keep it up.

    Kind regards

    Richard (UK)

    Reply
  47. Nabs March 30, 2013 at 9:31 pm

    You have just convinced me to begin my own “daily commentary” :-)

    Reply
  48. Amir Farokh March 30, 2013 at 8:50 pm

    Thank you for your hints and alert. It was very helpful and informative. As a result, I think any successful Forex trader should follow up the market situation and trend everyday, update him/herself and then record the events of the market in a diary for future use. It’s a very good policy, though it’s difficult especially for those who trade part time.

    Reply
  49. Nikos March 30, 2013 at 8:37 pm

    You have absolute right, the conclusion is to stay in-tune with the market and understand his idiosyncrasies. Thanks.

    Reply
  50. Siya March 30, 2013 at 8:23 pm

    Thanks, Nail, great staff.

    Reply
  51. colin pardoe March 30, 2013 at 8:18 pm

    Spot on

    Reply
  52. Bobbletog Flartybart March 30, 2013 at 8:13 pm

    I have been doing this for sometime now and I can vouch the method is invaluable for my trading.Keeping a diary on the markets I trade:
    instills discipline to write them every day.
    keeps me fully in touch with your charts and the price action form.
    allows me to test my trading skills by watching to see if the price moves inline with my expectations etc.
    Any trader who does this daily will definitely have a good edge over a lot of other traders. Good lesson Nial!

    Reply
  53. Greattrader March 30, 2013 at 8:02 pm

    Great!!!

    Reply
  54. Margaret March 30, 2013 at 7:44 pm

    Thank you for this explanation of how and why we get the ‘intuition’ thing happening. Although I don’t yet write a daily commentary, I recognize what you are saying about being in the zone when I study and reflect on the mood of the various pairs and how this comes through across the market in general. I just seem to ‘feel’ the mood of what is happening. When I take a longer break it takes a while to get that same understanding of where we are going in the market. I will start writing a daily ‘impression’ after my next month long break to more quickly get in tune with mood of the market. Again thank you for your help and insight to this phenomena – It a gem of advice. Sweet hunting to you all.

    Reply
  55. uknowme March 30, 2013 at 7:30 pm

    Hi Nial
    Thanks once again for this insightful
    tips.happy Easter!

    Reply
  56. rahim aziz March 30, 2013 at 6:57 pm

    Another great thing Thanks much Nial for adding me in Facebook. I have just a question? Do you have any idea how much percenttage of people who are using Fibionci retracement?? And is Fib really works?? Please let me know. Thanks!!

    BR
    Rahim Aziz

    Reply
  57. Daniel March 30, 2013 at 6:31 pm

    Nial,
    You really hit the nail on the head again as usual.. I’m very excited to start recording my thoughts.\\Dan

    Reply
  58. ed March 30, 2013 at 6:06 pm

    i like!

    Reply

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