Please see my posts linked below.
And in this thread too …
I’ll jump in here and suggest Al Brooks gives a really thorough view of the method.
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Thanks, I got a few of his books. So will have a read over xmas.
Thanks @QuadPip. I’ll have a look through.
You are not alone. Not many people here on BP do! Including those who think they are the “masters of the art”!
They cannot even agree amongst themselves what constitutes “price Action”. It is all mostly just market hype to boost their personal egos and/or sell products to the innocent.
So tread carefully and evaluate everything personally and take nothing for granted.
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Ok so am I right in saying price action is basically the movement of price and where it makes highs and lows and therefore support and resistance. Also when people draw trendlines, that is just to trade price action?
So when you have a bullish trendline and you think when price come down into the trendline you would go long. This is trading price action.
I don’t recommend the use of diagonal trend lines. They are meaningless IMO. Too much subjectivity in drawing diagonal trend lines. Each person may draw them differently.
And see also this example of price action where I call it in advance of the market.
I also don’t use them but maybe my objection is from a slightly different viewpoint.
I take your meaning to be that because multiple traders will draw their lines in different locations, they will not predict let alone cause price behaviour. The logical corollary to this is that of we all followed a standard procedure, the lines would predict price behaviour and could even cause it. Excuse me if I’ve got this wrong.
I don’t agree with this standpoint as I see forex markets as being too big and diverse to be predicted or affected by a single TA feature. My objection is that I don’t have a method for setting these lines consistently even on my own charts. I’d be happy to use them if I could know that I would always draw then the same way and in the same place on the same chart if I looked at it on two different occasions.
Maybe someone has some rational rules that can be followed for these things - if so, I might just might use them to guide my own trade decisions.
Diagonal trend lines don’t predict anything just as moving averages don’t produce bounces.
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Agreed on both counts. But that doesn’t mean they’re useless.
I use trend lines but more to frame the price to clearly see what is happening at a glace
Hehe, the “price action” schtick has been around since I first started learning forex years ago. I’ve never met a trader who took a “price action” course and remained profitable in the long-term. I’m happy to be corrected.
Hi Kevin! Good to see you again!
You raise what is actually the very core issue in both this thread title and, indeed, the entire question of Indicators v. PA. And that is “profitability”. That is the only yardstick that gives any purpose at all to the debate concerning which approach to use.
Whilst I don’t doubt your own experiences regarding other traders’ dubious results with PA, I think the key indisbutable evidence about this is provided by the brokers themselves.
It is not for fun or pleasure that ESMA brokers now have to place warnings on their home pages regarding their client failure rate. They WOULD be happy if it read, say, “only 1% of clients lose”. But the reality reads as follows and it is a different message all together - and it is a similar message across ALL the ESMA regulated providers:
“CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.24% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.”
This is a disturbingly high figure by any yardstick, but are we to assume that the remaining 30% profitable retail traders are the PA guys whilst the 70% losers are all the Indicator guys?
I don’t think so. Rather, what this statistic is shouting out loud and clear is that asking whether PA is better than indicators in profitability terms is actually asking the wrong question!
A retail trader’s profitability is much more influenced by other factors such as risk and money management, emotional control, discipline, etc than whether their trading method contains indicators and/or PA-based techniques.
A bad workman will make a mess of things no matter how refined their tools are.
But what is interesting is that it is the advocates of PA who are emotionally unstable and who stand up ranting against challenges to their “Sacred Cup” and resort to personal attacks on their perceived enemies" whereas those who have included some indicators in their trading, and have done for years, are just quietly carrying on with it without any need to shout and fuss! There are a number of such people even here on BP who will include some PA considerations but also include indicators. They are not emotional about this issue because their undoubted consistent profitability is dependent on those other factors.
PA activists have two basic misconceptions that blinker them to the truth that the process is identical whether one is trading indicators or PA.
The first is the first thing that they will throw into the ring - that they trade “current price” which is not lagging. It is true that current is not lagging (it cannot be be by definition). But the lie is that they are “trading current price”. They are not. Just as with indicators, they are trading the relationship between current price and, what one could term, a significant value that has been derived from historical price.
The proof, if needed, is easy. Give any trader a screen that just shows the current price as a moving dot with no history whatsoever visible and ask them to trade it according to just what they are seeing real-time. Not only will it prove impossible, it would also demand that the trader sits staring at that dot non-stop ad-infinitum.
Apart from maybe a few specialist scalpers, no PA trader can claim that they sit staring at the current price with no reference to historical price action.
But, of course, current price is important, but only as it approaches a pre-defined significant point based on historical data, i.e. lagging the current price. This significant point may be, for example, a previous high or low or a line connecting previous significant levels and then projected foward to the current price vertical line, or maybe a pattern, etc. Either way, current price is only relevant with respect to these pre-identified points. Its wiggling around in between, in “no man’s land” is simply the transition from one price “point of interest” to another.
The other misconception is “lagging”. Even PA gurus will agree that historical points are important and that it is a relationship between these two values that creates the trade. We only enter trades when we believe price will proceed to a level other than where it is now. This analysis process is based on historical price data which produces a projected value point on the current line and we trade the probability of current price moving to that defined value point.
Whatever method we use, indicators or PA, that value point is based in price data that is lagging behind the current price and is being updated as and when the current price is forming new significant values.
Lagging is a feature of both indicators AND PA and, far from being a “sin”, is, in fact, an essential ingredient in the process of defining our value points that form our trading points like targets and stops.
One example of the similarity in process is two traders, one trades fibbonacci number levels based on previous high/lows and another trades horizontal support/resistance lines projected forward from a series of historic points. They both project forward a series of horizontal lines forward from historic data but one is based on mathematical formulas and the other on earlier price candle/bar extremes.
They are different in approach and underlying principles, but the process of deriving current value points is the same -and they have the same difficulty - which, from the derived series of horizontal lines will hold and reverse and which will break and move on to the next.
…which returns to the original issue - is the PA trader or the indicator trader the most profitable? But the answer is surely that this is the wrong question. You use what works for you to build your risk/reward, money management, discipline, patience, when to stay out, etc, etc, etc,
Ditch the argument about whether PA or indicators -they both offer ways to analyse what the market is doing and they all need historic price to function.
And whatever you choose, avoid emotional instability - it will infiltrate into your trade, especially once you migrate to significant position sizes, and ruin both your financial and you psychological well-being!
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I’m not sure what that whole thread was about. It’s very confusing. As I understand, price action is looking at highs and lows price makes and you trade that. This thread is talking about moving averages, rsi and other things I dont really agree with.
Anyway thanks to everyone who pitched in. But I think I’ve read enough about ‘price action’. Its reminded me why I stopped reading about it the first time! Someone recommended al brooks so I’ve got his books downloaded and i’ll have a read.
indicators are essential to be able to do PA and therefore make trades
but using indicators alone to trade is calling for failure
most indicators were created for stock trading and before the use of computers or electronic trading, i will not say they are obsolete but rather unfit for trading unless they are used to do PA
The thread shows you how to trade a trend using pure price action. I also compare entries using indicators and show you how PA based entries are superior to indicator based entries. Not sure how you missed all that.
BTW, I was in that trade from the very beginning of the move, even before the low I pointed out was taken out. I had a 3 pip drawdown and took 300+ pips from that move. So you can disagree all you want while I collect pips.
Perhaps you can show us how you might have traded that same trend using indicators of your choice. I’d be very interested to see that, even with the benefit of hindsight. You up for the challenge?
Your loss. You weren’t really interested in learning about PA, were you? I see you coming from a mile away. 
So, sifting through your logic, what you’re saying is that in order to be considered as a successful and profitable trader in the long haul you would need to continue to participate in the BP forums, is that it? ROFL.
To answer the question, “Are indicators a waste”, from my perspective, indicators should be thought of as training wheels. It is PA analysis that will get you to a level of precision trading that you will never be able to achieve using indicators alone. Using PA you will be able to anticipate market moves. You will be able to trade with considerably less risk, with a much higher win rate and R:R. Your anxiety level will be reduced to almost nil. There are only advantages to learning PA and no disadvantages.
Notice that those who disagree have no knowledge of PA. It seems to me that they want to keep you from obtaining this critical knowledge; to keep you consistent with the average majority. I urge you to rise above that and to take a leap of faith in investing time and effort to learn PA. I did and I’ve never looked back. It is the most valuable tool you can use to trade any market.
I don’t know how long I will remain an active member at BP but know that, if and when I’m no longer active at BP it does not mean that I’m no longer a successful trader. That is just plain illogical. Question everything you read and apply logical thinking to arrive at your conclusions.
My intensions are, and always have been, to help newbies become successful traders. I don’t need your money and I’m not selling anything here. Don’t let these nay sayers and their cronies intimidate you. Feel free to IM me for help, as some have done, if you don’t want to deal with them on the forums. I promise to always tell you the truth as I know it, even if it goes against the grain of popular belief.
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Thank you, I had better get googling
I was interested in clarifying what price action is. The reason I’d had enough of reading these different threads is because it mentions so many technical indicators which you may have been using in the past.
You have already shown us how to do it in the thread. And the indicator chart and price action chart have the same entry candlesticks. So indicators didnt lag much in your example.
Regardless, I’m happy I understand enough and I’ll read the rest from books. I agree with you that everyone should learn price action trading. And if the use of price action makes you consistently profitable then it can only be looked at as a good thing! Thank you.
I think you just said it - look good in hindsight.
I never use indicators, but want to state that they were never meant to be traded with FX or any other leveraged trading tool.
Divergences, or overbought oversold tools CAN work if your an investor who doesnt use leverage or require PERFECT market timing.
They are not good enough for the likes of us who use leverage. Simply not precise enough.