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Price Action Trading System's
Price Action Trading - Holy Grail or Catchty Phrase
by Mack
If you are new to trading the markets, you may be completely unaware of the term "Price Action Trading." However, even if you are a long term and experienced trader, you may not be aware of the virtues of trading from pure price action alone. There really is no definitive definition for price action trading, but in general, it is making trade decisions based solely on the price action from a clean chart, without the aid of indicators. For most traders, including myself in the beginning, the thought of trading without indicators seemed completely foreign and almost impossible. However, once I became accustomed to it, it quickly became obvious that it was as close to the Holy Grail for trading that I would probably ever get.
There is no way I would now use anything other than price action to evaluate and trigger my trade decisions. If you stop and put some thought into this idea, I think you will agree with me in the end. After all, what are the factors that go into the formula of most popular trading indicators? While many traders may not even understand or know how their favorite indicator works, I feel confident in telling you that most all indicators are derived from the prices that are currently on the trading chart in front of you. In simple English, they are based on lagging and past information. If this is a true statement, and I believe you will agree after researching the formula for most of the popular indicators being used today, then you are basing your trade decisions on what has happened in the past, when it is better to try and determine what is going on right now on your chart.
A price action trader would actually tell you that it is more important to try and determine what is most likely to happen on the next few future bars that will be printing to your chart, rather than rely on an indicator that is basing its information on older and past or dated information. While even a price action trader relies on past price data to make decisions, it does not weigh into the overall trade decision nearly as much as the use of an indicator might. Price action trading is often known as "trading naked" for this very reason, because your trading charts will seem naked once you remove all of your old indicators that truly become crutches over time.
The best thing about learning to trade from pure price action is that you can use it to trade any market and any different time frame, and still have similar trading results. This is possible because price movements are nothing more than the trading actions of all of the involved participants in that particular market. Regardless of which markets are being traded, the footprints of the traders are all similar. This allows price action trading decisions to work the same in most every efficient market.
Try using your favorite indicator in most any other market and you will find that it may need tweaking. It is possible it might not even give you the same signals in many other markets, so you will have to experiment with it before you find that it tells you anything of importance. If you learn to trade using price action alone, you can transfer that knowledge to any other market and it will work just as well as in the previous market. This is true for futures, stocks, indexes and any other market that has sufficient volume to create valid charts.
If you have never taken the time to investigate or learn to trade with price action alone, I encourage you to do so. While you may seem a bit lost in the beginning, if you give it the necessary time of study, you will never look at a trading chart the same again, and you will most certainly never want to clutter your price chart with lagging indicators again.
by Mack
If you are new to trading the markets, you may be completely unaware of the term "Price Action Trading." However, even if you are a long term and experienced trader, you may not be aware of the virtues of trading from pure price action alone. There really is no definitive definition for price action trading, but in general, it is making trade decisions based solely on the price action from a clean chart, without the aid of indicators. For most traders, including myself in the beginning, the thought of trading without indicators seemed completely foreign and almost impossible. However, once I became accustomed to it, it quickly became obvious that it was as close to the Holy Grail for trading that I would probably ever get.
There is no way I would now use anything other than price action to evaluate and trigger my trade decisions. If you stop and put some thought into this idea, I think you will agree with me in the end. After all, what are the factors that go into the formula of most popular trading indicators? While many traders may not even understand or know how their favorite indicator works, I feel confident in telling you that most all indicators are derived from the prices that are currently on the trading chart in front of you. In simple English, they are based on lagging and past information. If this is a true statement, and I believe you will agree after researching the formula for most of the popular indicators being used today, then you are basing your trade decisions on what has happened in the past, when it is better to try and determine what is going on right now on your chart.
A price action trader would actually tell you that it is more important to try and determine what is most likely to happen on the next few future bars that will be printing to your chart, rather than rely on an indicator that is basing its information on older and past or dated information. While even a price action trader relies on past price data to make decisions, it does not weigh into the overall trade decision nearly as much as the use of an indicator might. Price action trading is often known as "trading naked" for this very reason, because your trading charts will seem naked once you remove all of your old indicators that truly become crutches over time.
The best thing about learning to trade from pure price action is that you can use it to trade any market and any different time frame, and still have similar trading results. This is possible because price movements are nothing more than the trading actions of all of the involved participants in that particular market. Regardless of which markets are being traded, the footprints of the traders are all similar. This allows price action trading decisions to work the same in most every efficient market.
Try using your favorite indicator in most any other market and you will find that it may need tweaking. It is possible it might not even give you the same signals in many other markets, so you will have to experiment with it before you find that it tells you anything of importance. If you learn to trade using price action alone, you can transfer that knowledge to any other market and it will work just as well as in the previous market. This is true for futures, stocks, indexes and any other market that has sufficient volume to create valid charts.
If you have never taken the time to investigate or learn to trade with price action alone, I encourage you to do so. While you may seem a bit lost in the beginning, if you give it the necessary time of study, you will never look at a trading chart the same again, and you will most certainly never want to clutter your price chart with lagging indicators again.