Ok I'm taking a break from my quest to design a holy grail indicator and I'm going to use ONLY PRICE ACTION. As of now, the following are my thoughts on price action (feel free to correct me if I'm wrong) Price Action has no definition. For the longest time I got pissed off every time I read a thread where someone said "indicators are useless, it's all price action." There was never a definition of it. It's like "go do task xyz" but not being given a definition of what xyz is or how to actually do it. Does it mean looking for patterns? Does it mean using S/R? If so, does it mean Pivot Point formula calculated S/R or does it mean dynamic S/Rs as defined by areas of S/R and previous high/lows? Does it mean using candle patterns? All I know is I'm pretty sure it doesn't mean using any indicators, including MAs. I think I read in a thread somewhere that Trendlines are allowed. They're not really indicators, per se, so they're probably good. So today I wiped all the indicators from my YM chart (except for volume, which I find to be as useless as a random distribution histogram, but maybe this is the time when I will understand how it can be useful. I've heard all the theories on why it's supposed to be helpful, it's just none of them are consistent. But that's all discussed in that other thread, so I digress.). So after watching the YM on a 400 tick chart (arbitrary number, no fib number voodoo, no magic multiple of 7 magic, I just thought 400 tick draw bars at a decent speed) with no indicators for the entire morning, never knowing where to enter, I finally grew some balls and placed a trade. But I will post my chart in a bit. As I understand it, price action is discretionary (to an extent)... right? This annoys me. When using indicator-based systems, even if they're not profitable, there is never any doubt ever about when to enter or exit. Signal. Enter. No emotion. Signal. Exit. Repeat. But discretionary systems don't have that luxury. So back to Price Action. One thing that I learned from jjrvat's "Day Trading 2.0 for small traders" thread is that price moves in waves. HH/HL, LH/LL. I believe that statement is in alignment with "Price Action." So basically, if you're going long, you probably have a better statistical chance of being profitable if your long entry is in an uptrend following a series of higher highs and higher lows. This is also known as "buying pullbacks." In the jjrvat thread, I used a relatively fast Hull MA to define the pullbacks for me, but since this thread doesn't allow MAs, I have to guess. I find guessing to be impossible. Price is going up... it's pulling back, there's a red candle... another... how do I know if this is a pullback or a reversal? Here's an example: Look at this chart. It's obviously heading down: Now, we don't want to sell just when it's going down (cuz that's always when it reverses ) so we're going to follow Price Action and buy on a pullback. That's safer. So what's the next candle? Ok cool, it's a hammer (sort of) type candle. This might be a good start of a pullback. So we'll just wait for the pullback (if it happens) and then sell short into this nice downtrend. Next few candles: Looks like a bit of a pullback is happening (good thing we didn't sell before, lol) One trouble spot I'm having is: how do I know when the pullback is done and it's time to short? and How do I know it is a pullback and not a reversal? Next candle: Hey, that's a pretty big green candle. Maybe this downtrend is over. Maybe Buying pressure/momentum is increasing. I have no idea. Is now a good time to short? Or should we buy? I dunno. So I'm gonna sit on the sidelines for a while longer. (Note: It takes me forever to edit the charts so only show one candle advance at a time, so I'm just gonna post the rest now. Hopefully you all understand my point. The reason I am trying to post them one candle at a time is because I feel like most of the "price action" charts posted here are done after the fact when everything is obvious. It's insanely difficult to know in real time what is going on, this especially applies to the people who draw perfect trendlines after the fact. How many trendlines did you draw in real time that didn't work? but more on that later.) Here's the rest of the chart (for a while): Hmm, turns out that was a pullback. So there was some money to be made in there. What does Price Action use to determine when to exit? Say you got in after the pullback (which we didn't even know was a pullback and not a reversal until after the fact anyway). Since there is no indicator saying "exit", how do you know? Trendlines have two aspects that I don't like: 1) I never know where to draw them, and 2) I don't like how other people post charts with perfect trendlines after the fact when there's no way they could have known which one to use when the chart was live. For example, look at this chart from today. Check out these channels I drew. They are awesome and perfect, and obvious. I'm such a master trader and all you noobs suck. See how easy price action is? Seriously. It's so easy after the fact. Let's look at the same time period but with trendlines that could have been drawn in real time (rather than breaking down the chart into bar by bar, I'm going to assume that the readers of ET are able to extrapolate and pretend that they were only seeing one bar at a time) What an ugly mess! And just a quick note about volume. I know that many people think volume bars the the holy grail, but here is why I don't know how to use them: I can't get a straight answer on how to use them. For example, some people say "volume spikes signal the beginning of a trend," other people say "volume spikes signal the end of a trend." The crafty ones say something ambiguous like "watch volume to determine trend" and they're all correct. That last guy has put himself in a great guru position, too, because then if volume occurs high at the beginning, he can say "see, volume spike = beginning of trend. Volume leads price." But if it occurs at the end, he can say "see? volume spiked as all the noob buyers came in trying to get on the trend. Price goes where volume is." It's circular logic exploited by "gurus" (term in quotes) to bewilder noobs. Based on my experience, volume is as useful as random distribution. Sometimes it does one thing when price is doing something, and other times it does the opposite. Because there are no hard and fast patterns, I say it's not useful. But for the purpose of this thread I am leaving it up on my charts just in case I have a lightbulb moment or something. Alright I think this is long enough for a first post in a thread. To summarize: - I'm trying to define price action. Right now I think it means: -- look for patterns (double tops/bottoms, candle patterns like hammers, etc.) -- look for HH/HL, LL, LH, price moves in waves, trade in the direction of the trend after pullbacks, in other words, don't go short if price is making HHs and HLs - I do not know how to tell if price is just "pulling back" or "reversing" (without the help of MAs, which as I said in the beginning, I'm trying to do away with). - I do not know when to enter (ie. when the pullback is done) - I do not know what to do about determining exits. Ideally you would exit when price is done moving in a certain direction, but how do you know? And if it goes against you a little, how do you know if it's "just" a pullback vs. an actual reversal and you should get out? - I do not understand how to draw correct trendlines in real time (as opposed to after the fact when it's easy to make them perfect) My charts are much bigger when there's no indicators below them Much, much more later.