How do you trade based off of "price action"

Discussion in 'Trading' started by ET873, Nov 6, 2009.

  1. ET873


    I am a newbie here. As the thread title asks, how does one trade based off of "price action". A lot of people claim to trade purely based off of this. To those who do, what do you look for? I have spent quite a bit of time looking at charts, as soon as I think I have some understanding of "price action", I look at historical data and try to predict what happens to the right of the screen, I scroll right and I am wrong most of the time. Very curious, how does one trade off of price action?
  2. I really like Gary Smith's book, __How I Trade for a Living__, in which he spends a good deal of time discussing how he has traded using pure price action. As far as I know, it involves looking for norms that repeat consistently over time, such as breakout patterns. Larrry Williams gets into this quite a bit, too. Check out his "oops" pattern, which is about the best of pure price plays. Jake Bernstein also covers pure price trading in his various books, although he doesn't call them that. You can use volatility-based indicators, such as the Volatility Trend Indicator, aka the Volatility Stop, to help you spot breakouts beyond some multiple of the average true range. It's more often used to close positions, but I like it to open positions, as well. There are those who rely heavily on chart formations and trendlines, which would also constitute pure price trading. I refer you to the work of Oscar Carboni of, who provides a near daily market analysis video coming from the standoint of classic charting techniques. For what it's worth, I am having the most luck with Bollinger Bands, especially when used in concert with other indicators, like the on balance open interest--my favorite. That indicator is truly awesome for divergence plays. I agree with your idea of testing your predictions by moving slowly through historic charts, trying to divine the outcome before scrolling right. Just try the techniques of Bollinger, as put forth in his book and website, I bet you'll find you can start kicking the market's ass with his approaches. Bottom line, don't be fixated on trading with pure price action. You can integrate your knowledge of breakouts, chart formations, etc., with other devices for a more robust and flexible approach.
  3. Dude... That's your problem, right there.

    The answer is both very simple, and very complex. But you can't get around your dues. Watch the price quote. Think about what you see. What does the quote trying to tell you? Forget charts. BTW, forget ghouls on the internet trying to sound educated.

    Just out of curiosity, what is "quite a bit of time" for you?
  4. You seem to imply you know what price action trading is but you're not profitable at it although you don't mention what exactly you mean by historical data.

    Just in case you're confused about what exactly is price action only trading (no indicators)...try using Google search about any one of the following terms related to your trading instrument:

    * Support Resistance Levels or Zones

    * Chart Patterns

    * Breakout Patterns or Strategies

    * Fading Breakout Patterns or Strategies

    * Times & Sales or DOM Quotes

    * Japanese Candlestick Patterns, Levels or Zones

    I could go on and name about another+50 different types of price action only trading and then it becomes endless when you begin merging one of the above with another.

    Something else, it will take a year or more of real-time screen work in developing something that works if you have the other important stuff in place...

    * Market Experience

    * Money Management

    * Discipline

    * Team Collaboration

    * Proper Workstation

    * Proper Broker Platform

    * Proper Trading Environment (at home or work)

    * Proper Capitalize

    Simply, if you've only been at it a year or don't have enough time to do all the above into one smooth trading plan.

    If all the above sounds complex...guess what...the markets are complex. Thus, get use to it.

  5. Smurfie


    This is an unhelpful answer to a question he didn't ask.

    OP, price action trading is usually meant as taking set-ups indicated only by what you may glean from a chart without any technical indicators. Support and resistance usually figure largely in these strategies coupled with chart or candlestick patterns. For instance, a hammer bouncing off support makes most PA people all warm and fuzzy inside. I'm the same way, although I mostly base my trading off indicators (but don't tell the PA people I said that ... indicators make them homicidal and preachy which is much worse).

    Happy trading,

  6. One of the best examples of how it's done can be found here:

  7. Aaaand here we go...

    You talk about no technical indicators, and the very next words you wrote are support and resistance. Guess s/r is not qualified as indicators. Funny. A "hammer bouncing off support" is not pure price action. Or it is, if you adhere to the definition that "price action is anything where the price wiggles and gyrates in some form or the other". Hence I wrote the answer is very simple and very complex. It is simple, because those who know what price action is understand it as a simple concept. Some like to use overgeneric definitions that mixes a lot of things together, hence the complex part.

    As for the unhelpful answer...

    I gave the guy the best advice anyone can hope for from strangers without putting some genuine work into it. Watch the screen for a very looooong time, and then it will click. Or not, but then he could still come back here and start whining about being spoonfed something he didn't like...
  8. HH, HL, LH, and LL.

    That's it.

  9. my 'price action' trading is based on Elliott Wave, fibos, channel lines, time, observing
    their interaction particulary when they intersect, trading their interaction/intersection
  10. Smurfie


    orange_trad, please read all my words before you start inane semantic nitpicking. Even if you were right, it's not helpful. Also, you claim to have given OP good advice. He wasn't asking for that. Hence, you're being unhelpful yet again.

    OP, I tried a test search using the phrase 'price AND action' and selected titles only and show results as threads. Up comes a host of threads on various approaches to PA.


    #10     Nov 6, 2009