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

Quote from Zr1Trader:

If you want a very in depth Price action approach to the markets read "Trading Hammers (revisited)" a thread here at ET.


There is more than just entries to consider to be successful . Entries are only the tip of the iceberg for any method.

Entry
Trade management is very important. (trails, targets ect.) when to do what.
Risk Rules per trade
Risk rules (day limits)
Position sizing for the appropriate conditions.
Context of the market. (did we just have a 100pt drop when this setup formed or have we been chopping all day when this setup formed)
Disaster management (did my connection just go belly up, did a terrorist attack happen)
Contingency plan before you stop gets hit(stop and reverse conditions)

Every signal facet of detail you can think of regarding trading should be thought out so you are in full control at all times and know what to do in every situation .


IMO Strategy coding would be very very difficult without millions of dollars to cover all of the above material in detail. I personally believe better returns are achieved with PA trading using your brian to adapt to conditions. A computer cannot do that.

Im not saying a computerized system can't be profitable but IMO your brain can understand the current situation in context much better.
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So would you say that the traders in the Hammers thread are more profitable than the industry average? Based on your best guess, of course.

Agree that entries are only one piece of a much larger puzzle.

But, do you think that PA trading is better at enabling you to be in full control at all times? I agree with you 100% that you need to never be unsure or have it be ambiguous what you should to in every situation, but don't other methods enable this level of control? Personally, I have yet to see anyone discussing a method as precise as my own (not that I have a full knowledge of what others do, I just know what I see) and I know that when I have used other methods in the past, they never allowed for the same level of precision as I have now, where every single tick in the market can drive a specific response from me as a trader (either "take no action", "enter", "move entry price", "exit", "move stop").
 
Quote from rew:

I fail to see any real distinction between "price action" and TA. I define TA as any trading method that's driven solely by the price and volume charts. People using "price action" are using *some* sort of pattern matching to decide when to enter a trade, and some purely chart based rule to exit, so how is that not TA?
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It's a good question. The answer I've seen given is that because price action doesn't use any indicators that it's different from TA. So, since your TA definition didn't mention indicators, maybe it's a semantic argument about what TA is?

I do know this: if I could memorize the T&S record for the instruments I trade in real time, I wouldn't need charts at all. Since I can't, I do create charts to visualize it. Does that make what I do TA in your definition?
 
Quote from logic_man:

So would you say that the traders in the Hammers thread are more profitable than the industry average? Based on your best guess, of course.

Agree that entries are only one piece of a much larger puzzle.

But, do you think that PA trading is better at enabling you to be in full control at all times? I agree with you 100% that you need to never be unsure or have it be ambiguous what you should to in every situation, but don't other methods enable this level of control? Personally, I have yet to see anyone discussing a method as precise as my own (not that I have a full knowledge of what others do, I just know what I see) and I know that when I have used other methods in the past, they never allowed for the same level of precision as I have now, where every single tick in the market can drive a specific response from me as a trader (either "take no action", "enter", "move entry price", "exit", "move stop").
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Hammer traders compared to industry average? What's the industry average for intraday trading? The industry average is negative intraday. So if you can turn a profit using any PA method I'd say you are beating the average.

As far as "full control at all times" well, each method is subject to a market being lockded up for days (9/11) or unforeseen broker errors, platform errors ect. so kind of a tough to answer that. I feel more in control when I am the one executing the trades personally.



The main reason I advocate PA over anything else is that I can quickly adapt to changing market conditions where a system may not be able to. Of course if you can find a better method than PA then by all means use it. I am just talking from my experiences personally.

"Personally, I have yet to see anyone discussing a method as precise as my own" what's your method based off of ?

Best wishes
 
"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)"


PA is a part of the larger TA, IMO
 
Technical analysis is the study of price action. Thus, all analysis of price action is technical analysis. Even if it`s at the bid/ask level without a chart. At the most fundamental level we can say that technical analysis is built on concepts such as support and resistance, trends (identifying and trading them), trading ranges, breakouts and identifying oversold/overbought conditions.

Now, there are certain people who believe that adding indicators may help them better identify trends or trend reversals and oversold/overbought conditions. Most people who are new to trading are drawn to these indicators, since it gives an impression of a 100% win rate and free money. After all, it does look pretty cool and impressive, right?

Then you have a different group of people who believe that adding indicators only distort the price action, especially since most of those indicators are derived from price and volume itself. They know that indicators are lagging and that there is no indicator that works all the time. For example, in a strong trend, an oscillating indicator may say that the market is overbought while the trend still has lots of potential. These people believe that the solution to this problem is to drop indicators altogether and simply study pure price action without any indicators, except for volume.

Both group use the basic concepts from technical analysis, they only differ in that one group uses indicators to help analyze price while the other drops them altogether.

Thus, the real distinction should be trading without indicators versus trading with indicators :) Those who don`t use indicators have commonly been called price action traders.

Personally, I am of the opinion that price derived indicators adds nothing of value to a discretionary chart trader. Actually, they are more likely to hurt your trading. For a system trader it would be a different story.

Does that make sense?
 
Quote from Zr1Trader:

Hammer traders compared to industry average? What's the industry average for intraday trading? The industry average is negative intraday. So if you can turn a profit using any PA method I'd say you are beating the average.

As far as "full control at all times" well, each method is subject to a market being lockded up for days (9/11) or unforeseen broker errors, platform errors ect. so kind of a tough to answer that. I feel more in control when I am the one executing the trades personally.



The main reason I advocate PA over anything else is that I can quickly adapt to changing market conditions where a system may not be able to. Of course if you can find a better method than PA then by all means use it. I am just talking from my experiences personally.

"Personally, I have yet to see anyone discussing a method as precise as my own" what's your method based off of ?

Best wishes
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Fair point about the average trader being a net loser. I guess that's the question I'm trying to get data on, whether or not the "average" PA trader is also a net loser or not. I started this thread because after reading the other threads on PA trading here, it seemed like the implicit claim was that the average PA trader is a net winner, which is a pretty bold claim. Maybe I'm reading too much into what's been posted on PA in the past, but that's my interpretation of it, anyway. People will say things like "You can't use that other crap, use PA!". Well, OK, is PA going to make me profitable or just a little less likely to lose?

And, yes, there are things that no trading method can overcome, like exchanges being closed, so all methods are equally disadvantaged there, unless you could back up the claim that PA would be more likely to position you favorably ahead of those events, e.g. if PA was more likely to get you short before something which closed the exchange happened (assuming that when the exchange opened back up, it'd be down a bunch). I don't know because there are many traders using PA and I doubt they would all end up on the same side of that trade.

My own approach is based on T&S.

Best to you, too.
 
Quote from Fireplace:

"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)"


PA is a part of the larger TA, IMO
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OK, maybe it is, but I don't think you'd get a consensus to agree with you on that. Not that consensus is always a desirable thing, of course.

But the broader question would still remain, which is whether, of the TA traders, those whose TA consists of PA were more likely to be profitable?
 
Quote from Laissez Faire:

Technical analysis is the study of price action. Thus, all analysis of price action is technical analysis. Even if it`s at the bid/ask level without a chart. At the most fundamental level we can say that technical analysis is built on concepts such as support and resistance, trends (identifying and trading them), trading ranges, breakouts and identifying oversold/overbought conditions.

Now, there are certain people who believe that adding indicators may help them better identify trends or trend reversals and oversold/overbought conditions. Most people who are new to trading are drawn to these indicators, since it gives an impression of a 100% win rate and free money. After all, it does look pretty cool and impressive, right?

Then you have a different group of people who believe that adding indicators only distort the price action, especially since most of those indicators are derived from price and volume itself. They know that indicators are lagging and that there is no indicator that works all the time. For example, in a strong trend, an oscillating indicator may say that the market is overbought while the trend still has lots of potential. These people believe that the solution to this problem is to drop indicators altogether and simply study pure price action without any indicators, except for volume.

Both group use the basic concepts from technical analysis, they only differ in that one group uses indicators to help analyze price while the other drops them altogether.

Thus, the real distinction should be trading without indicators versus trading with indicators :) Those who don`t use indicators have commonly been called price action traders.

Personally, I am of the opinion that price derived indicators adds nothing of value to a discretionary chart trader. Actually, they are more likely to hurt your trading. For a system trader it would be a different story.

Does that make sense?
More...

I agree with you here when you say that most refer to PA being No indicators, vs use of indicators. That is kind of in line with my idea of automated systems vs PA . Then again some automated systems just use PA for signals instead of indicators for signals.

To the OP it really would be cool to distinguish "what works better" PA maunal trading vs Indicator manual vs PA automated vs Indicator Automated vs statistical automated vs statistical Manuel. on and on. In reality there really is no way to gauge what is the best for YOU until YOU are happy with what you have. The answer would be different for each persons circumstance, objectives, capital ect.
 
I started out as a systems trader some 15 years ago. Tierd of system performance decay and of constantly looking for new island of opportunites in ever changing mkt. I started to explore discretionay trading.

I wanted a method that would seamlessly work and make the transition from trading range to trending mkt conditions.

i started studying price action last summer 2010. price action trading I believe is a method that is able to survive and adapts to all mkt conditions.

After interacting with many many pa traders and exploring price action trading. I have found absoutly NO evidence that success rate of price action traders is any higher than of the general trader population. ie 9 out of 10 or 90% of traders who study price action fail and move on to other approaches.

price action trading is hard work, it requires one to have the thinking hat on all day, rather than being spoon fed by indicators or systems.
 
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