I think it’s pretty much established, even by traders who trade mechanical systems based on one or more indicators (or a combination thereof) that any mechanical trading strategy has a shelf-life and can expire at any moment. Otherwise EAs would be continuously profitable (which we know they’re not). Even if it doesn’t expire all at once, you certainly lose your edge over time with a rigid system.
Question is: does naked price action trading have such a shelf-life? Or would learning the ins and outs of price movement a skill that will last you a lifetime?
For context, I just bought the book “Naked Forex” and started reading it this afternoon. They talk about “terrible-system traders” (those traders who have terrible systems) and how these systems can lose their edge unless you constantly tweak it, and I’m interested in people’s real life experience with the alternative method (naked price action) that they’re advocating - especially if you’ve been using it for years.
I’m sceptical that systems which are profitable over the long run of trades just stop working: the inherent tendencies of markets don’t stop or die. More likely a failed system was profitable only short-term due to a statistically foreseeable run of positive results.
Any system can and should be tweaked but only up to an optimum point in terms of win rate, r:r, drawdown etc., but not constantly.
Thanks for the response, tommor. But have you not come across sentiments that “markets have changed”? Or that systems have “lost their edge”?
I would like to agree with what you’re saying, but I don’t have the experience to say that would be the case. From what I’ve heard it certainly seems that systems aren’t generally consistently profitable over many years.
Yes, I’ve heard them both, but I don’t believe either. Prices change every second but markets don’t change. So a system that relies on the constant laws of the market cannot lose its edge its edge is part of the nature of the market.
The constant laws of the market are crude of course but they can be at the heart of any successful strategy -
supply and demand: more people buying than selling - price goes up
prices that are rising/falling tend to continue
prices don’t rise/fall in straight lines
Some strategies only work in a bull market or if price is trapped in a range: that’s fine as long as they cease giving entry signals when those conditions change.
Of course, there are situations where markets are evolving rapidly, such as a new or emerging market that is building structure and participation very quickly - but we would see the effects of this in the chart.
Let me tell you a little secret, ANY MECHANICAL SYSTEM WILL FAIL ALWAYS…
the only algorithms that don’t fail are the one used by MM to create the market.
now in regards to PA alone, ok I PA alone is good to see SR levels and confluence levels, but do they tell you the exact story? NO, NO they don’t.
because using PA alone you cannot understand the background of the chart you can’t read the full contents or footprints of SM intentions.
Now if you learn to use PA structure, volume, and SR then you have all you need to be a profitable trader for your entire life.
100y ago they (livermore, wyckoff and many more) were using volume to trade and made fortunes, today volume is still the main thing to use while trading, and continues to tell you all the story of the backgrounds of the charts.
Learn to read the laws of supply and demand, balance and unbalance phases.
volume traded - impossible to have it in the spot so called forex market, only futures and commodities
tick volume - possible to have in forex, but still some brokers can mess the feeds and give you poor tick volumes readouts,
are they the same NO
do they indicate the same YES -
They indicate areas of increased interest in a chart.
How do you get the volume simple comes in every trading software as a basic tool.
hope it helps
PS - I know what you are going to say next the same old thing it’s not real volume bla bla bla, well I’m not here to make you believe, I am here trying to help people… if you don’t believe in tick volume then my honest advice is don’t even lose your time commenting on volume threads cheers mate have a good trading day ahead.
Sorry bro, don’t agree. As everybody else knows, I trade PA of tick charts. You know, profiting off noise.
Where as I agree, from my own research, there is a correlation between tick volume and real volume, by nature it is a self for-filling prophecy. It is impossible to tell if volume is buyers entering the market, leaving the market and same for sellers. Making VSA totally mundane and irrelevant to the spot forex market. In my experience (which is not that great) those who use VSA are expert technical analysts first and foremost.
And there seems to be this myth that support/resistance, supply/demand bla bla bla somehow relates to PA. They don’t. PA is subjective and discretionary. Where as a PA trader may use these form of analysis, their decision is based on what the price is now, where the price was and what it did in-between. Price and time. It’s the only two bits of information the market affords to us retail traders.
@shaforex, its not that mechanical systems fail. Its the market is ever changing. Just because something as simple as a MA cross over system which did work but doesn’t work now, doesn’t mean it won’t work in the future. It will. Your job is to define market conditions. Which is why I love my tick charts. I get to trade in the here and now and don’t have to concern myself with “current market conditions.” Just what the chart is telling me.
Hello again bob, well I wont start an discussion on that because, that’s not what I do, trading is an infinite world and traders all trade different, so there’s no point on arguing about this or that, SR and part of PA analisys period >P
“It is impossible to tell if volume is buyers entering the market, leaving the market and same for sellers. Making VSA totally mundane and irrelevant” in fact, let me repeat in fact you can have an idea by analising the reaction and the background.
Now in regards to price and time, the controversial starts to go deeper right? because you can trade off the 4h charts and make one trade a week, where a trader trading from 5 min will make 20 trades using the same aproach only with time and price.
so I can assume different time frames tell you different stories one tells you time to buy the other time to sell, and that’s a bit awkward to say the least.
So to conclude I assume that Tom Williams, a VSA FOREX trader, spent all his life studying livermore and wyckoff for nothing because VSA is " mundane and irrelevant" ?!?!?!
Well the fact here is no he didn’t lose is time nor his money in fact he made millions with VSA in forex…
PS - I’m not against other trading methods tick data and PA are very good if done properly, moving average trading is excellent if done properly divergence trading is excellent if done porperly fibs eliots bla bla bla all is perfect if done properly.but it happens I like to use VSA. just that
I don’t know anything about algorithms, never seen one, never used one. So I’m not 100% sure we’re talking about the same thing.
My point is that when people say a valid purely TA-based system stopped being profitable because markets changed, they can never provide anything on the chart that shows what happened and how markets changed. The charts through the two periods will show identical behaviours - price goes uo and down, if price establishes a trend this usually continues, but not in straight lines.
Until they can show these mysterious changes in the market, I can’t believe they’re right.
Let me help you with that bro. Im on my phone on a smoko break so it wont be too complicated or in depth. But then it doesnt have to be. And since we’ve used a simple MA crossover as an example we’ll use it again.
So market conditions before an FOMC release typically start to range. But after the release (particularly if the news catches the market of guard) they’ll start to trend. You wouldn’t want to trade using this system before the release. But after it could be quite profitable.
Market conditions is the great get out of jail free card typically used by marketers when their systems fail but they don’t understand way
See, I’m just the opposite - I can totally see how a system that is optimized to work in a trending market would stop working once the marked starts ranging, and vice versa.
I also suspect, although I have no proof, that a system optimized to work in a trending market and that had stopped working when the market started ranging would then start working again once the market started trending again.
I wonder if it’s because they have tunnel vision, and aren’t keeping in mind the longer term context?
If you trade the one minute chart, you should have in mind the trend that shows up in the one-hour chart. If you trade the one hour chart, you should have in mind the trend from the daily chart.
Without going too in depth and losing the theme of this thread - it is actually very possible to create a trading approach that self-adapts to different market structures. This eliminates the need for any sort of manual updating, tweaking or optimisation.
This is where systems, manual systems in my field, do last the test of time. Ideally focusing on the inputs of price direction, volatility and average daily ranges. Those three elements are the building blocks to identifying what market structure your are currently looking at. As long as these three variables feed into all decision makings from a top down approach then your sure to be in the right ball park.
In short though, I’ve personally tested and seen manual trading systems which do last the test of time and still perform exceptionally well today. In some cases these manual systems are breaking record returns this year when initially ran from pre 2008.
It’s ok to adapt to change, but be ready to know and understand what you need to look at and more importantly why.
And for the record I trade 1H charts and never ever use Multiple Timeframe Analysis - it’s all in the charts ready for you.
Going back to the original question, Does Price Action (without indicators) have a shelf-life?..I’d say price action WITH indicators has a shelf-life. Not the other way around.
I’ll throw in my 2 cents here. I don’t think any approach is better or worse than other. There are almost an infinite amount of ways to profit in the market. The challenge is that no strategy works all the time. Some work more often that others, but often the ones that work less gain more. Automated systems work in the market conditions they were designed to work in. They can be adjusted to adapt to different market conditions, but that requires constant reprogramming of the system. Since PA is manual by nature, the trader is able to adapt on the fly, which makes it more reactive than a system would be. All in all, what stands the test of time IMO is the ability of the trader or programmer in the case of an automated system to adapt to the ever changing market or have the wherewithal to know to only trade in the conditions in which the system is designed and stay out of the market when that edge is no longer present.
If you have a strategy for long-term trading, there is no point in trying to use it for short-term trading. It’s obvious. If there is such a strategy, just wait and see how it shakes out.
The reason ‘systems’ don’t always work, is because they are designed to work in certain conditions and when conditions change - system doesn’t work as well. Price action is learning the repeating and predictable patterns of the market - and learning to take those trades which statistically have the best survival rate. The price action trader must still learn how to operate in different market conditions, but unlike the system he can adapt and be flexible. IMO. Price action has no expiration date.
cheers mate have a good trading day ahead.