Why not trade price ?

[Chicken Little]

bump

 

[forextrades]

Quote from oddiduro:

All indicators are some sort of interpretation of price. Usually it is significantly delayed.

Why not just trade price and price alone?

Best Regards
Oddi

Easier said that done for some. I use indicators and I'm successful. They add some objectivity to my trading. If I trade off just a price chart, I tend to overtrade and don't stick to my plan.

 

[jamis359]

Quote from davelansing2004:

jamis,

with regards to your example of the down day, what if the bulk of the volume had been above the previous days close (making it an "up" day at that point in time), yet a sell-off occured late in the day on low volume that dropped the price down by 0.75. How do you interpret that? Would you still believe that distribution is going on? I'm not trying to be a smart a**, but trying to figure out the use of volume as it relates to price movement.

IMHO if you're trying to interpret what's going with volume inside of a single bar or candle, then you need to drop down to a chart with a shorter timeframe.

The value of interpreting volume with price is apparent over several bars on a chart. Reading price and volume together can help you spot market inefficiencies, which can be exploited if and when the price "returns to the mean."

If you look at this chart for example:

<img src=http://img397.imageshack.us/img397/7545/genz2jp.gif>

In July there were big price moves on big volume. Clearly the price increased because a surge in demand outpaced the available supply of stock on the market. Chances are mutual funds, hedge funds, institutions, etc. are bullish on GENZ's future prospects and are positioning themselves accordingly.

In August, the price drifted down from $75 to $70 on below average volume. This is a market inefficiency -- the asset value of all shareholders is being influenced by a small number of traders, whose opinion of the stock probably do not represent the majority. The price decline is masking the net accumulation. And so, chances are, assuming there are no sudden market events or sudden company news, buying here would probably return a profit eventually.