Quote from Jreality:
You remind me of someone on another forum who insists that trading price action is the way to go. He says he doesn't use any indicators.
QUESTION: can I read price action from ordinary candlestick charts, or do I need to read time and sales data? What timeframe do you use to read price action and catch a move like what happened today (sept. 1st)?
I'll tell you my setup since you're curious, but no specifics on my method. I trade primarily off of a 20 second chart since I am a scalper. I also have a 1 minute and a 3 minute. These are my primary charts that I stare at 90% of the time. I also have longer term charts further out of my line of sight, right up to the 8 hour and daily time-frames. Those are very useful for seeing large S/R levels and patterns at a glance. While I say that I am a scalper, actually I only scalp during range-bound markets. As soon as the market starts to trend, I become a trend-following trader. There is a key to knowing what to look at to figure out when it's starting to do this. I can't tell you what it is, because that would be giving away too much.
I use a single MA on the 3 minute and 1 minute charts, along with a VMA on the 20 second chart. I read all 3 time frames simultaneously, although mostly my eyes are on the 20 second (obviously). The MAs are useful as reference points when reading price action, and also to keep the various time frames in your mind all at once, with how they relate to each other.
Reading price action is not about learning the standard candlestick patterns you read about it in books. They do appear, but you don't need to know their names. You just need to see reversals happening again and again and again, and you will start to recognize how they form. Actually, all kinds of patterns will start to become recognizable to you that nobody ever wrote about. The speed at which bars form is extremely important. There is so much more information you get in real-time watching a bar form than you get by looking at a static chart after it is completed, even on something small like the 20-second time frame.
I strongly recommend reading Alan S. Farley's book called the Master Swing Trader. It is quite possibly the worst written book I have ever read in terms of grammatical construction (it's literally a series of almost unrelated sentence statements from beginning to end), but it contains a hell of a lot of good information for day and swing trading. Pay attention to when he talks about the "trend-range" axis, and how markets transition from one state to another. He talks in very detailed language - it's definitely not a book for beginners, but you'll find it useful if you take the time to go through it.
Your key to success is going to be detecting how the market transitions from a range-bound state to a trending state, and vice-versa. If you can nail that, the rest is easy. There are very tiny signs that show up in price and volume patterns again and again, not written about in any textbook, that will tell you when the market is starting to change state. I see them all the time on my 20 second chart, which most traders don't look at (which is one reason why I have a huge advantage over them).
It also is important to learn how to read volume properly and its relation to price movement.
Finally, stop trading the ES. Start trading markets that have a better daily range relative to the slippage costs to get in (defined as spread + commissions). The ES is not good in this regard, and there are easier markets to trade. I trade crude - but it's jumpy, and you really don't have much time to think on that one, so be careful if you want to start there. Otherwise maybe Soybeans, or for indices, the Russell is way better than the minis.
I can tell you that there is no easy path to success, as you are finding out with your educators... your best option is ignoring them all, watching the market, and trying to figure it out on your own. But expect to put in many thousands of hours of work before you even have a shot at it.
That's about the best I can tell you...
