The concept of price action trading embodies the analysis of basic price movement as a methodology for financial speculation, as used by many retail traders and often institutionally where algorithmic trading is not employed. Since it ignores the fundamental factors of a security and looks primarily at the security's price history — although sometimes it considers values derived from that price history — it is a form of technical analysis.
What differentiates it from most forms of technical analysis is that its main focus is the relation of a security's current price to its past prices as opposed to values derived from that price history. In simple terms, price action is a trading technique that allows a trader to read the market and make trading decisions based on the actual price movement on the chart, rather than relying on lagging indicators. Most indicators are derived from the actual prices on the chart, so they are in fact, giving them information on past price movements.
Price action trading is the science and art of trading these price fluctuations over time with little or no indicators. By learning to read price action and price’s movement over time, one can; see where the institutional players are heavily involved, where they are driving the market, where are key support and resistance areas, where to find precise entry and exits, what is a key breakout, how to catch reversals, tops and bottoms, get into trends, what are impulsive vs. corrective moves, what kind of market environment you are in and more.
At the most basic level, traders who use price action are at a huge advantage because they actually learn how to read the raw price charts and trade directly from them. Many people who are trading forex, do not actually understand what they are doing, but instead rely on indicators and luck, hope or intuition, or maybe at best they stick to a general rule (such as trade with the trend, the trend is your friend etc.), but beyond that do not really understand what they are seeing when they look at the charts.
No two people will analyze every bit of price action the same way, and that is why a lot of traders find the concept of price action so elusive. Quite literally, price action is everything that a security's price does, and just like every other facet of analysis, it is purely subjective. Price action traders are not likely to become millionaires overnight with price action trading, but when used correctly, it can help them to become better traders. The simplistic strategies and concepts can be understood by nearly anyone, which makes it an extremely attractive way to trade.