Price action - does it make any sense?

[intradaybill]

Quote from jcl:

It's interesting that you mention Michael Harris, because I found his software on the web and it's one of the reasons I wondered about price action. At a first glance his website looks like a scam - its purpose seems promoting his relatively simple software at a ridiculous price. But on the other hand, when price action indeed works, then what he's doing would make sense.

That is why in another thread I said you must be a newbie:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=238236&perpage=6&pagenumber=2

Harris has been around for as long as I can remember with other names like L. Williams and LBR. I attended one his talks as an invited speaker by Tradestation Technologies in New York back in 2000. I read his first book in 2001 if I recall correctly. Some of the patterns he has at the end of that book are still profitable. His program looks simple only to newbies like you who cannot understand why a shorter time period is an easier fit than a longer time period and think the usefulness of WFO is to help mitigate that effect.

If the purpose of every business website is to promote its products why is it a scam when Harris or anyone esle is doing that in their website? Even this good website and forum promotes its sponsors. Is it a scam?

I freqeuntly see posts of R. Vince here promoting his book. Do you think that is a scam? On the contrary I think people like you with extremely limited understanding of trading and virtually no experience as it seems will benefit reading his book - actually he is making a favor to you promoting his book.

As far as the subject of this topic: Yes, price action makes a lot of sense and it doesn't have the problems of other methods but as someone already pointed out the significance issue is very important. I will rank methods below based on my experience, worse to best:

1. Indicators
2. Chart patterns
3. Basic candlesticks
4. Support/resistance, trendlines, swing high/low, etc.
5. Price action, algorithmic or patterns with no parameters (Harris)
6. Arbitrage/pairs trading/RTM - very difficult to do (Big funds)
7. HFT (Collocation, low latency trading)

 

[Rita]

Quote from ssrrkk:

You bring up a good point: there are perhaps 3 main elements to PA. One is to define your probability bins (events, cases) by bar-patterns. This is easy to do and easy to get stats on. Unfortunately most of these are noisy, and barely give you enough positive expectation above commission+slippage. The second is based on the "shapes" of the price trajectory, i.e., lower highs higher lows, trend lines, bull flags, bear flags, pennants, etc. This is the bread and butter for a successful discretionary trader. The problem with this one is that it is difficult to write a program to detect and bin those general "shape occurrences" to count and formulate your conditional probabilities. The third is based on ranges: where you are in today's range, yesterday's range, wrt pivot lines, weekly range, quarterly range. Again this is fairly straightforward to calculate probabilities, but most of these again are not slam dunk cases, and often what is significant in the last 3 years will not be significant for the next 3 years, etc. I think by far, the second item above is the most reliable, but the most difficult to code.

Do you use a certain time frame for PA or does the time frame not matter? And does PA also work for Forex?

 

[RCG Trader]

Quote from Rita:

Do you use a certain time frame for PA or does the time frame not matter? And does PA also work for Forex?

Use a TF that enables you to accurately process information. I trade FX alone, and I use price action alone.

Again, find a time frame that lets u leisurely make trades, when it gets boring, advance.

 

[ssrrkk]

Quote from RCG Trader:

Use a TF that enables you to accurately process information. I trade FX alone, and I use price action alone.

Again, find a time frame that lets u leisurely make trades, when it gets boring, advance.

Yes, it works in most time frames. I use it exclusively for day trading but the journals on this site show that it works very well in swing trading.