Can Price Action ever be anything other than "Discretionary"?

Hi all,

When I think of what constitutes discretionary trading, I think of trades that are based on decisions and that two different traders may react differently to the same situation. On the other hand, mechanical or system trading is one that has a very clear algorithm it follows for every element of the trade (from entry and position sizing to exits or stops) and all traders will do the same thing (if they follow the plan, of course).

I have an affinity for price action. I feel like it has the potential of being more accurate than reliance on indicators. But I would like to have consistency in my trading - indeed one must be consistent if you want not to screw up your odds in the long run. It seems like it’s a lot easier to be consistent with “indicator X crossed indicator Y at the same time that oscillator A shows value of B” than it is to be consistent with “if you spot pattern P, go long”.

I don’t know, I think different people see different patterns and you can never fully take discretion out of pattern recognition…

Where am I wrong here?

[I]*Note: I am still in learning phases and not even demo trading yet, so the question should be taken in that context.[/I]

I certainly consider price action trading - at least as it is mainly applied - as being discretionary. I would also say, however, that indicator-driven trading can also be discretionary. Many indicators are subject to interpretation - or at least should be viewed in the market context.

I’m not convinced you [U]are[/U], at all (other than perhaps, [I]very[/I] slightly and [I]very[/I] pedantically, in the sense that [U]some[/U] purely-price-action parameters can, in fact, be fully automated, and in that sense therefore be said to involve no “discretion” at all … but I doubt [U]very[/U] much whether a retail trader could realisitcally build a viable, steadily profitable system just around those, so it’s kind of “academic”, really.)

Other than that minor, parenthetical, academic point, I agree completely with the broad thrust what you’ve said, anyway.

For what it’s worth, if anything, I very much share your perception that given your background, circumstances and objectives, price action (i.e. rather than indicators) is very likely to be “the right way to go”. I make this comment perhaps with some bias, since it’s how I trade, myself, and I offer it in the knowledge that not everyone here will necessarily agree with it.

I also strongly agree with your sentiment that one must be consistent if wanting not to screw up one’s odds in the long run: long-term, successful trading isn’t necessarily about doing anything difficult - it can be about doing perfectly simple things, but [U]very[/U] reliably and [U]very[/U] consistently. But the process of [B][U]learning[/U][/B] how to identify and execute them is still in itself necessarily difficult and time-consuming (in my opinion, natch.) To put it bluntly, price action is going to be needed to “get you there” (with [I]or[/I] without indicators, actually), but admittedly it’s harder and slower to learn than indicators.

I suppose, [I]very[/I] pedantically, one could try to “debate” that and produce some kind of rarified counterexample, but for all practical, reasonable, relevant purposes I agree with you, anyway.

It would be [I]really[/I] nitpicky (even by my standards!) to dispute what you’ve said above. My perspective is the same as John’s (just above): price action is (realistically) “discretionary” … and indicators can/should be, too, really. :slight_smile:

blurgh… the more I get into it the less likely I am to quit my day job…

But back to the point - If I understand what you guys are saying, it’s this:
It will take a long time for you to consistently identify the price action patterns.
No, there is no objectivity here.
Yes, where one person sees a support worth clinging to another person might see it as less relevant. But over time (realistically a long time) you will get to identify the patterns consistently.
The reason you’re not consistently profitable to begin with is because you’re not consistently seeing the same patterns, which effectively means you’re “jumping from system to system”, which ruins your odds for long-term success.
But once you start identifying patterns consistently, you can build a “system” out of it and trade that system consistently. And then you will start to see profits more consistently. (assuming that system has an edge).

Yes? No? Missed something?

I wouldn’t say there’s “[U]no[/U]” objectivity (I actually think there’s plenty, and it can [U]certainly[/U] be learned, gradually, by first studying price action textbooks and then gradually putting what you’ve learned into practice), but realistically there’s always going to be [U]some[/U] subjectivity, too.

I agree.

That’s true for some people, I’m sure. People vary in their approach.

My own opinion is that the more willingly people believe that some elusive combination of indicators can [I]in itself[/I] predict price movements adequately to constitute a successful trading system, effectively bypassing the necessary stages of education and practice (i.e. by simply “copying something that just ‘works’,”) the [B]more[/B] likely they are to chop and change their systems all the time, without ever changing their underlying approach, and the [B]less[/B] likely they are ever to become steadily profitable.

[B][U]All[/U][/B] the (several) people I know who trade successfully (and/or for a full-time living) with indicators are using them [I]in conjunction with[/I] price action, anyway.

Yes. Missed nothing significant. :cool:

Just an observation,

I’m not sure if you’re putting to much emphasis on finding ‘repeatable patterns’ - of which there are many many, and of which I think are all just a fallacy of illusion (making nothing fit something, perhaps?)

Chasing patterns will end in you topping yourself - there will never be a textbook pattern that you’re looking for. Rather you will always find ones that ‘just about’ fit, personally I don’t like that and it’s certainly not a route that a trader should be taking if they appreciate objectifying and quantifying all trade rules, entry, exit & management.

Buy some good books, perhaps on Price Action, Lexy had a good list - i’m sure these will answer alot of your questions, and more.

Thanks Lexys and Jezzode again for your input.

@Jezzode, this was my initial quandry. I would like to be as objective, quantifiable, scientific as possible… basically to have something that is reproducible that I can then look back on and say “ah, that was wrong of me to take this trade (not because it was a winning one or a losing one, but because of the method)”. I feel like that will allow me the consistency I’m looking for.

If you don’t mind my asking, what is your approach? I don’t need the nitty gritty, but how do you approach a trade? Would it be different from pure Price Action?