Price Action based Analysis

Discussion in 'Technical Analysis' started by bearmountain, Dec 3, 2010.

  1. I don't know how to say this, but are there analysis techniques that are based on pure price action analysis?

    Two that come to mind are:

    1) Michael Harris - trading patterns.

    This essentially mines data looking for price patterns, so if c[0] > c[2] and c[2] > c[1] and c[3] > c[4] ... then buy. sell next bar at profitprice limit;

    2) Market delta.

    This looks at order flow, bid/ask pressure.

    I am looking for non-traditional Price Action analysis techniques. So they are not indicator based, no calculations involved. Any thoughts, info would be greatly appreciated. Thanks.
  2. mark1

    mark1 Guest

  3. IMHO MarketDelta would give you a better place to expand your horizons. Both Price Action Labs and Al Brooks offer tired information. I would imagine you have already looked into that if you have gotten this far.
  4. I have used APS, the older program from Michael Harris and I recently upgraded to his new one he calls Price Action Labs. The good thing about it is that you can bulk-test the price patterns forward or in out of sample. I still think that his price action p-indicator is much more interesting. A few very good signals recently for market reversal. Not good for intraday though as it woud be very slow to run. Maybe cloud computing will change that. Overall I think his mining methods produce little randomness as more than 95% of the pattern I get have some regularity in their structures. I think it is one of the most interesting programs I have used so far.
  5. speres


    have you read tom williams stuff, a must read imo.
  6. IMO you should really stick to the highest probability signals and not waste your time with the lower ones. They're just not worth it unless you've got another edge added to it. The reason I say this is that you can really get on a path to over-trading and all that time could be spend better focusing/waiting on the cream of the crop.
  7. Totally, I mean I totally agree with you. This is probably one of the most valuable lessons of years of trading. The patience to wait for a high probability setup.
  8. Good point, I am making a transition from mechanical trading to discretionay trading.

    high probability setup - I have thought about this, why I have difficulty with this. I believe my previous trading style of 100% mechanical trading is the culprit. Where in systemetic trading one takes every signal, my win rate was only 43%. With mechanical trading waiting for high probability setup is quite foreign.

    Al Brooks does this quite well, I paid for his webinars few months ago. He lets many trades go and just waits and waits.

    Thank you all for your replies. will look into Tom Williams VSA.

    I believe footprint charts help quite a bit with price action trading.
    Frankly I am surprised they are not that well known, certainly I never heard of them until quite recently.
  9. Very impressive post.

    Your rationale for leaving mechanical trading and going to discretionary trading has a strong basis of your difficulties regarding your specific mechanical approach.

    In terms of PA only, Separate PA derived indicators must be used for different market platform execution actions.

    I follow you posts wherever they are made.

    The platform possible behavioral actions DO have a heirarchy. This is a different consideration than trading probabilities.

    Your mechanical orientation was to take all signals and do something when the signal occured. You also note that skilled traders do not do this, you mentioned one of the five behavioral platform actions in this regard (WAIT).

    There ar many ways to trade. The PA only list has a spectrum as well. You noted it.

    My point to you is to consider and see if you can figure out the behavioral action heirarchy. From my experience in watching people overcome your current difficulties, I notice that they improve most once they figure out why and how the hierarchy of platform behavioral actions works.

    Placing WAIT above ENTER in the hierarchy is what you are going to begin to do someday. thi sacrifices time in the market but you gain what you call "less risk".

    By symmetry, you have to consider how this pair (WAIT and ENTER) are replaced by another pair for times when you are IN the market as opposed to times when you are OUT of the market.

    This pair is HOLD and Exit. Which triumphs which in the hierarchy? If you can understand that, for you and for Al Brooks, WAIT triumphs ENTER to avoid a lot of ENTER signals, then wouldn't HOLD triumph over EXIT for a lot of exit signals?

    You will probably leave mechanical trading and take fewer trades BUT you will not stay in a trade very long because your discretionary goal will become to get to the sidelines and then do a lot of waiting. I think this is how it goes for most traders before they give up trading due to long relative inactivity between profit segments.

    This means, of course, that you can't pair as above. That is probablyy how it will turn out for you.

    Lets say you wid compare the two pairs (above) and you stacked them over one or the other. What is at the top? To make money you have to prefer HOLD and EXIT above the WAIT and ENTER.

    Look at it for a moment all stacked up.

    You can see where the fifth behavioral action item fits into the hierarchy. Then you get to see the target for the top level of trading that makes most money from the market's offer.

    Starting to learn to develop skills has to have a lot of "WHY's" worked through.

    As we find out in ET, people get headaches really easily when they stop postponing thinking about gaining expert skills.
  10. I probably should have spelled out the details of the hierachy for those who need such a support level.

    here is pair one:


    HOLD is above EXIT.

    Stacking them as pairs gives:



    To see the fifth item you lok for the partss of a REVERSAL.

    Thay all appear under HOLD as a stack that shows a REVERSAL.

    The result is:


    Obviously this is where the pool extraction application of PEP became SCT for neutral biased trading of futures indexes. Most do not stay in the market all the time (on any fractal given sufficient liquidity.) and just extrace the full market's offer segment by segment using a HOLD/REVERSAL strategy.
    #10     Dec 5, 2010