Nothing Beats Price Action, Everything Else is Derivative

[yoohoo]

Quote from MandelbrotSet:

Not long ago I (and several other ET regulars) got into a long drawn out discussion (ie, flame fest) regarding Indicators vs. Pure Price Action.

Whereas I had been on the fence before now I have to jump off of it and say that nothing beats price action, everything else is derviative and there is an inverse relationship between the complexity of the indicator (if one is used at all) and it's usability as a reliable trading tool (iow, if you do use an indicator, keep it to one, and KISS).

This one's for you, Stealth Trader.

Hope this helps anyone who's searching.

Good trading.

Hi Mandle, was wondering to what degree you are a purist on PA? Not trying to be clever, just that I think using PA is a bit like being vegetarian... some eat eggs some don't. For example, do you use horizontal S&R? If so what about trend lines? In my opinion both are giving a future projections "derived" from PA so I'd class them as indicators. Are you vegan PA or vegetarian PA ?

I'm interested because we have both studied the markets for a long time and both reached different conclusions. Personally I'm glad not everyone is like me... they'd be pretty ugly for a start. But I'm interested in looking at where our paths diverged and why.

One futher question - you must have an armoury of great PA signals - any chance of sharing them? So many say to learn PA just look at price, but I don't think that's fair. Understanding PA needs a good teacher and hat's off to HG for sharing.

You must have an ace or two up your sleeve - so how about a few tit bits for the experienced traders looking to improve?

 

[MandelbrotSet]

Quote from yoohoo:

Hi Mandle, was wondering to what degree you are a purist on PA? Not trying to be clever, just that I think using PA is a bit like being vegetarian... some eat eggs some don't. For example, do you use horizontal S&R? If so what about trend lines? In my opinion both are giving a future projections "derived" from PA so I'd class them as indicators. Are you vegan PA or vegetarian PA ?

1. Price Action
2. One indicator
3. TA (whatever that means to the individual trader, could be anything from MA's to trendlines, to momentum indicators, etc.)

I'm interested because we have both studied the markets for a long time and both reached different conclusions. Personally I'm glad not everyone is like me... they'd be pretty ugly for a start. But I'm interested in looking at where our paths diverged and why.

This is the concept that I use to consistently make money in the markets, and I decided to share it.

One futher question - you must have an armoury of great PA signals - any chance of sharing them? So many say to learn PA just look at price, but I don't think that's fair. Understanding PA needs a good teacher and hat's off to HG for sharing.

You must have an ace or two up your sleeve - so how about a few tit bits for the experienced traders looking to improve?

Sorry, but I'll have to decline on that one.

I really don't like the trolls, and the newbies are still too wet behind the ears to even remotely appreciate what I've done for them posting this much. :eek:

It's true.

But good luck with your trading. You're already pretty good as it is. And if you stare at the screens long enough maybe price action will start speaking to you in the language of the markets also.


If anyone has any questions, please refer to the lesson on page 22 of the thread.

 

[Goinglite]

Quote from MandelbrotSet:

Nothing Beats Price Action, Everything Else is Derivative

Lesson 1

I've updated riskfreetrading's Short of the NDX to include his original entry, showing you a CLASSIC example of why you should never, ever, ever trade against Price Action.

This is a classic newbie mistake, and he's lucky that he isn't trading the leveraged futures (my weapons of choice ) trying this stunt, otherwise he would be looking at a blowout sometime in the near future (because of increased leverage and overnight gap risk :eek: ) ... I'm sure he's going to hold onto the trade until it proves him right, regardless of the amount of heat he has to take (you know, like that guy who brought French Sogen bank to its knees and caused the U.S. to lower interest rates by 1/4 of a point )
***
Note: This is and will be the only formal lesson on this thread ... it's the only one you'll ever need.

Interesting Does he give a reason for shorting the market there??

 

[Goinglite]

Quote from riskfreetrading:

I never wrote that the action of OP to start this thread is not good. I noticed the repetitive statements and uses of expression that are not even defined. I expressed my opinion, and posed questions. Is not that what a forum is for?

Those who feel that I am attacking: I am raising questions on your posts, not on you personnally. Can't you differenciate between yourself and your posts?

Maybe I should just stop posting.

PS:

If someone wants to follow/judge my trades/trading, I have been posting my exact entries/exits/size when I trade EUR/JPY here. I post my trades live. There are a lot of trades in there for sometime now. You can make your conclusion on your own.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=122521&perpage=6&pagenumber=110

In your thread, do you give any reason or methodology for your entries? Any setups or rules for setups?

 

[yoohoo]

Quote from MandelbrotSet:

1. Price Action
2. One indicator
3. TA (whatever that means to the individual trader, could be anything from MA's to trendlines, to momentum indicators, etc.)

[You'll get thrown out of some PA Churches for 2. & 3. Perhaps our paths are not that divergent after all... I'd have to say 2. & 3. are derivates that you've found to work.]


But good luck with your trading. You're already pretty good as it is. And if you stare at the screens long enough maybe price action will start speaking to you in the language of the markets also.

[Thanks for the good wishes but I know you don't believe in luck at all. I don't know anyone better at PA than me and that's why I am always searching for anything and anyone I can learn from. But I understand you wanting to keep your cards close to your chest.

Best regards and thanks for the reply.]

 

[slapshot]

Quote from NakedNote:

Accept it, if you need indicators you can't read price action well enough.

Nothing wrong with using indicators to complement your readings just accept the fact that you will be slower and by definition, inferior.

NN

This is certainly an opinion, not actually a fact. Because it really depends on trading styles.

It does interest me how some of the people on this thread actually have some kind of an ego about being a "pure price action" trader. Like it makes them a black belt or something.

I think this is funny because all traders only see what they are biased (or conditioned) to see. If you take 10 PA traders and show them the same trading conditions, they will all interpret current price action differently - this is what makes a market to begin with.

In my own trading, I am capable of using pure PA to scalp. This requires substantially more concentration than indicator trading.

So I have found that as a visual aid, so that I don't have to stare at the screen every second, that I can use this one indicator to help me spot pullback & trend continuation vs. a true reversal of trend. I don't think this makes me inferior. It makes me smarter and more efficient.

In fact, I use this one tool, along with PA and trend determination, to try and stay on the path of least resistance.

And it is my opinion that pure PA is more relevant when the market is near potential S & R pivot areas - when the market is between those points, buy/sell pressure is harder to detect just with pure PA.

And answer this for me: take a good histogram indicator that on a modern sofware platform updates tick-by-tick, right along with price. It is based on price. It updates exactly along with price. So how does this lag any more than a human interpretation of price?

 

[slapshot]

And while we are at it, basically there has been two main themes or definitions of PA discussed:

1) Tape Reading (the DOM or T&S) as PA

2) Price Bar Reading (Trend, Pivots, Higher-Highs, etc.) as PA

So there apparently is no one "true price action"

So which one are you defending?


PS Thanks for leaving, Jack. That was your best contribution as usual.

 

[NakedNote]

Quote from slapshot:

This is certainly an opinion, not actually a fact. Because it really depends on trading styles.

It does interest me how some of the people on this thread actually have some kind of an ego about being a "pure price action" trader. Like it makes them a black belt or something.

I think this is funny because all traders only see what they are biased (or conditioned) to see. If you take 10 PA traders and show them the same trading conditions, they will all interpret current price action differently - this is what makes a market to begin with.

In my own trading, I am capable of using pure PA to scalp. This requires substantially more concentration than indicator trading.

So I have found that as a visual aid, so that I don't have to stare at the screen every second, that I can use this one indicator to help me spot pullback & trend continuation vs. a true reversal of trend. I don't think this makes me inferior. It makes me smarter and more efficient.

In fact, I use this one tool, along with PA and trend determination, to try and stay on the path of least resistance.

And it is my opinion that pure PA is more relevant when the market is near potential S & R pivot areas - when the market is between those points, buy/sell pressure is harder to detect just with pure PA.

And answer this for me: take a good histogram indicator that on a modern sofware platform updates tick-by-tick, right along with price. It is based on price. It updates exactly along with price. So how does this lag any more than a human interpretation of price?

Let's see it, post the last three trading days on the instrument of your choice with the indicator of your choice.

NN

 

[slapshot]

Quote from MandelbrotSet:



For me Trading Price Action is defined as: placing trades in the direction of the current trend when price moves in that direction.

IMO, this is not really Price Action trading but rather simple Trend Following. (That doesnt take away from your point though.)

IMO, real Price Action is the buy/sell pressure (tape reading) at points of support/resistance to determine whether follow through or reversal is more likely

 

[slapshot]

Quote from NakedNote:

Let's see it, post the last three trading days on the instrument of your choice with the indicator of your choice.

NN

No, thank you. Because I am not interested in your critique, Mr. Brand-New-To-This-Forum.

And in case you missed it, we are a having a conceptual discussion here, not "mine is bigger than yours".