Discussion: Understanding & Trading Price Action

This is my first attempt at a thread like this so bear with me.
From time to time I will post a review, and if I can I will put links of all of the reviews in my next post so that any person can read the review posts to catch up.
Because a good discussion should flow well the dominant topic will be discussed until it is mostly agreed upon. If multiple issues are brought up during that then other issues will be “queued” for discussion later, or have their own thread for concurrent discussion.

-To allow for a guided discussion to learn and understand how to trade price action
-To come up with one more trading ideas for a trading stragey, and for those to be peer reviewed.
-To allow for any member of the community to contribute, learn, and have a place to discuss things.

-Keep all things on topic, the topic, or issue at hand will evolve over time naturally, this is fine.
-No personal attacks, If there is something wrong with a post, attack the information, not the person.
-Don’t feed the trolls, if a post is off topic, or a personal attack don’t quote or discuss it, if it gets removed later it will be confusing to read about a post that is no longer there! =O

My next post will be for the review links and my post after that will hopefully get the ball rolling.

Definition of Price Action (Under Review)

[B]Current topic:[/B]
The current topic is now defining objectives and goals; Personally and for this thread.

[B]Back Burner:[/B]
Tools for our tool kits
Methods for trading price action
The flow of each currency pair. [I](How differently each pair moves, reacts to news, etc)[/I]

What do you think the goal should be? I will hopefully not be the only one here.

I think the goals will be what I posted first, but more importantly I personally want to know the following:

How can we know, with where the price has been alone, and no external indicators where the price is going? I don’t consider trendlines as an indicator, I consider them a visual aid. If we absolutely must use indicators, we need to use as few as possible, preferably none.

Drawing trendlines is not an indicator per say. I consider bollinger bands an indicator, and I use them anyways, but they don’t clutter up my charts as they are usually a dark color and are not used in the normal way. I still personally want to detract from everything, including my favorites. I want to understand price as a behavior all its own.

Sometimes we may challenge a preconception we have of the market, we need to allow such discussion if it happens, we may just strengthen it, or we may tear it down. What ever happens please keep those discussions on topic, about the topic, and not about the author(s) personally.

I now turn the tables to you. What do you want to learn, where do you want this discussion to go, and what are your personal goals for this thread?

First maybe a definition of what price action is?..hopefully one that everyone can more or less agree on if you catch my drift…;).

Uh-oh. Trouble brewing.

Don’t be so melodramatic…lol…just trying to avoid trouble by learning from the past…:wink:

Ok, we can start by defining price action.

How do you all define it?

For me I consider price action to be anything related to the price itself. This excludes all indicators because while they are based on the price, they are not the price itself. It also excludes trendlines for the same reason :cool::eek:

Price action would include candle stick trading, but as that horse has been beaten to death I will try to avoid it with this thread. :smiley:

To make it easier I will define price actions as certain patterns, or characteristics exhibited by the candle formations themselves, and or their relative position to one another.

I’m open to other definitions ideas critiques etc of the the term “price action(s)”

For me price action is simply the movement of price. Whether it is a candlestick, bar chart, or line chart, price will either take action by moving up or down. A variety of tools are then employed to take measurement of the price action. How we interpret that measurement is really the cause for debate.

Very well said!

How about: Price action is the result of the then current price through its up and down movements over the course of time.

In my toolkit I think of price action as both price patters like classic chart patterns, elliot wave and candlestick patterns. And tools that help project targets for potential support/resistance and pattern price targets.

So to me, price action is about identifying patterns and prevevious S/R to project forward future potential S/R.

Marking up the chart with trendlines,fan lines, fib retracement, projections and so on.

I think those tools have more to do with interpreting price action, or making things more apparent to the trader. To me they are more visual aids. Other then that, I agree with you.

So unless anybody contradicts the current definition, perhaps we can agree?

Price action is the price itself, including the patterns and behavior it displays, and trading price action methodology includes candle stick patterns, support and resistance trendlines, etc. Things that are drawn on the chart by the trader, not by some mathematical formula.

Price action to me, is nothing more than momentum, and direction.

[B]Review: (In progress)[/B] Definition of Price Action

Class thoughts on this topic:

I think here my general definition stands, but we have also jumped up and also defined ways to use price action.

Definition of price action:
Price action is the result of the then current price through its up and down movements over the course of time, including the patterns and behavior it displays.

The methodology of trading price action varies with each trader but can include chart patterns, specific candle sticks, support and resistance trendlines, etc. Things that are drawn on the chart by the trader, not by some mathematical formula.

What can be included with this definition: Trend lines, candle stick patterns, support and resistance levels, fib. levels, fib. fans, retracment fans, etc.

Things that are excluded by this definition: Bollinger bands, MACD, RSI, Stochastics, volume, and any other indicator not specifically drawn by the trader on the chart.

Short of a post disproving this definition with logic within a few days this topic will be considered resolved.

Back to our previous topic. What do you want this thread to explore, and what do you want to learn personally with regards to the subject matter. The issues brought up here can help shape the direction of this thread, or include topics to cover.

Hello, i think that Master Tang wrote best definition - momentum and direction. I would like to add that trend lines, patterns, s+r are direct by product of PA and indicators are indirect by product of PA. For example horizontal support line is placed and interpreted directly from PA. Boilinger bands consists of simple moving avarage and outer bands which are standart deviation of moving avarage. So person looking at BB interperets not the PA directly, but the avarage of the price and its standart deviation (Price actions by products by product). I am very new to trading and posting so i hope this makes sence. If possible i would like to discuss possibilities of trading S/R lines, like reversals or breakouts.

Price action is about trading about the fundamental of the law of demand, the cause and its effect contrary to stochastic (indicators) approach based on pure correlation which is a black box approach.

For me using patterns per se doesn’t imply price action if it doesn’t rely on this fundamental interpretation. Patterns can just be used like indicators: black box approach.

Patterns are CAUSED by price action. They don’t IMPLY price, they WERE in a historical sense or ARE the movement of price.

You really need to get a grasp on the basics.

Momentum is related to indicators which price action doesn’t want to rely upon.

Momentum of price is NOT related to indicators in any way shape or form…

Again, get a handle on the basics.

I suggest reading through BabyPips school for a while.

Your posts are far from accurate, or contributory.

I do however find them quite entertaining.

Good point on the fact that indicators are based on a product based on price action. I would love to skip the middle step myself as it sounds like you would.

We should cover those topics in due time, to be sure I have added them to the “back burner” list. So they will be covered. Instead of those specific examples I have summed it as “Methods for trading price action” as well as “Tools for our tool kits”

I think you meant to say which the OP doesn’t want to reply upon. PA tends to do whatever it wants, when it wants, like a spoiled child.

As far as momentum there is the indicator, and there is a few ways in which it relates to price action alone. Very long bars with no wicks indicate strong momentum. A fast moving market in one direction is a type of momentum. There is also the momentum where you can watch the price slow down as time progresses. Look at any chart and you can usually find a place or two where the price goes up for a few candles in a row. The last few candles tend to get shorter, then it starts to go down again.

The last one can be a type of pattern. I don’t see how you would consider this a black box approach, but I can understand wanting to imply a broad definition of it.

If you would like to discuss what is and isn’t black box I can add it to the back burner list, so we can define it for our use in this thread.