"Price Action Only" traders - More likely to be successful?

[mdl060374]

Quote from logic_man:

While I'm not necessarily disagreeing with you, doesn't the hypothesis that price action is easier to trade, yet fewer people use it than use FA or TA, go against human nature to be lazy?

I think it depends on how you look at it. Have you ever heard the phrase in life of something being "relatively simple...just not easy to implement."

I think the trap ALOT of traders fall into, is that they dont have a plan, so they dabble in a bunch of things.. Lose money of course, and dont stick with a technique..

Then, the next trap is to assume to be successful, you need to come up with some extravagent holy grail, indicator, or stumble upon a "secret."

This assumption for many, creates a vicious cycle.

So while it might be human nature to be lazy, its also human nature to jump to conclusions and make false assumptions, and not like to be wrong about things. This just fuels the fire.

So while we might be lazy, we also tend to overcomplicate things.

 

[MKTrader]

Quote from logic_man:

I read a lot of posts that say the only real way to succeed in trading is by "graduating" beyond FA and TA and using "price action" (PA) only (although, to be clear, price action is defined differently by different traders, but then so are FA and TA). But what kind of evidence is there that traders using PA are actually more likely to succeed than other traders? Maybe there is some evidence, but I seen it stated more as a truism than as something which has been empirically validated.

You're right. "I only trade price action. Drop your indicators, do enough 'screen time' and you'll realize it's the only way to trade" is a popular line on trading sites. I've seen many would-be gurus on trading forums make this claim, but never seen one produce account statements, live accounts (with investor-only access), etc. I've challenged a few of these gurus to prove their claims, but none have so far.

It would be interesting if someone did a study with three groups and compared the performance:

1) Pure system-based and mechanical traders (to include some auto-trading systems)

2) Pure price-action traders

3) Discretionary traders who use some combination of PA, FA, indicators, systems/algorithms, etc. as "tools" only.

You'd have to have a decent sample size in each group, and hopefully have traders with similar experience levels. I doubt this would ever happen. I can't see anyone in academic finance doing such a study, nor the TA/trading magazines. But it would be the way of knowing if "pure price" action traders are superior as they claim.

 

[bone]

Ask the overnight guys in Eurex from 1997 to 2008 if price action works. They got flipped and fucked continuously by Harris Brumfield and Paul Rotter.

There is so much order crossing, quote stuffing, order queue gaming, and spoofing going on in the market (especially during "off hours") that IMO trading solely on "price action" and using price action footprint studies (liquidity taker vs. maker / aggressor ) like Market Delta is not the "be all to end all. "

If you are combining it with other studies and techniques that incorporate trend and some longer term metrics into the mix then it probably would be more effective in the aggregate long term.

 

[gotta_trade]

Quote from bone:

Ask the overnight guys in Eurex from 1997 to 2008 if price action works. They got flipped and ***** continuously by Harris Brumfield and Paul Rotter.

How does Harris Brumfield and Paul Rotter trade?

 

[bone]

Quote from gotta_trade:

How does Harris Brumfield and Paul Rotter trade?

Through extreme gaming and conivery they get all the scalpers levered one way, and then flip them. It never bothered me because I spread traded - in fact, I appreciated the liquidity.

The markets are never what they appear to be, and whatever you do, please do not lean on size.

 

[gotta_trade]

Quote from bone:

Through extreme gaming and conivery they get all the scalpers levered one way, and then flip them. It never bothered me because I spread traded - in fact, I appreciated the liquidity.

The markets are never what they appear to be, and whatever you do, please do not lean on size.

Thanks for the response. I don't mean to derail this thread in anyway, but can you give me an example as to how they trade? And can you give me an example as to how you trade?

Disclaimer: Excuse my ignorance, but I haven't read through your thread yet, but I'd like to hear what you have to say.

Thanks!

 

[bone]

gotta, you can search ET or google 'Paul Rotter flipper' and get all kinds of fascinating and lewd commentary.

In terms of my trading, maybe you can peruse the Futures Spread Trading thread over in the Educational Section. I also have some stuff posted on my website.

 

[baro-san]

Quote from logic_man:

... So, I'm in no way a fan of FA or TA, but I'm still curious about the performance claims made for PA, since if it was so much more likely to lead to success, why isn't everyone doing it? The way those who use it describe it, it's not as if it is more (or that much more) intellectually-challenging than either FA or TA.

PA is like speaking the language, while using indicators is like using a conversation guide in that language. So the performance you get when using PA vs. indicators, is the same when you talk to a foreigner and you learned his language vs. when you're using a conversation guide.

 

[MKTrader]

Quote from baro-san:

PA is like speaking the language, while using indicators is like using a conversation guide in that language. So the performance you get when using PA vs. indicators, is the same when you talk to a foreigner and you learned his language vs. when you're using a conversation guide.

That might be a fun little analogy, but again, any proof of this? Everthing I've heard is anecdotal so far.

 

[Scataphagos]

Quote from logic_man:

I read a lot of posts that say the only real way to succeed in trading is by "graduating" beyond FA and TA and using "price action" (PA) only (although, to be clear, price action is defined differently by different traders, but then so are FA and TA). But what kind of evidence is there that traders using PA are actually more likely to succeed than other traders? Maybe there is some evidence, but I seen it stated more as a truism than as something which has been empirically validated.

Now, I say this as someone whose sole approach to the market is through PA (no indicators or fundamentals) and I'll take any trade my strategy dictates even if it goes against my bias because my research shows that I can't outguess the strategy, so no use in trying anymore. So, I'm in no way a fan of FA or TA, but I'm still curious about the performance claims made for PA, since if it was so much more likely to lead to success, why isn't everyone doing it? The way those who use it describe it, it's not as if it is more (or that much more) intellectually-challenging than either FA or TA.

Price Action is part of TA.