subject: Trading Price Action Vs. Indicators (round 1) [print this page] Traders all over the globe have been battling over the proper way to day trade. Trading Price action or price action trading as its called is taking precedence when compared to following Indicators on a chart. Whats better? What works? What makes the most profit? Lets compare the two methods of trading and come to a conclusion to which trading style comes out on top. Let us digest the question that most serious trades come to realize. Which method works better, price action or indicators.
Price Action as explained and taught by DayTradeToWin is a method of trading where price is used as the primary tool for determining risk and reward in real-time. In terms of online day trading, price action is the price movement displayed on the chart, and nothing more. The price as displayed and plotted on the chart real time can provide traders everything they need. The 5 minute chart seems to be the most popular. Inherently, price action is a singular method of trading, requiring no external trading tools (like indicators), plug-ins, or other third-party software for charting purposes. All that is required is an understanding of the market, and a set of rules for interacting with price and the ability to identify price behavior. Sounds simple enough, right? Well not so fast. The interpretation of the price is what makes or breaks price action trading. Without the proper understanding, education, and specific rules, the chart looks nothing more than random bars. Having the key to decipher the code is what price action is all about. John Paul, founder of DayTradeToWin has in fact taught traders to decipher this code with outstanding results and testimonials.
Adversely, indicators are third-party extensions that summarize data, advising traders when and how to trade. Indicators exist for nearly every aspect of day trading for nearly every software platform that supports them. For example, NinjaTraders indicator list includes indicators ranging from Bollinger Bands to oscillators, moving averages, volume averages, stochastics, and everything in between. Indicators that focus on price action do not exist for the most part, with the exception of those offered at DayTradeToWin.com. This exception is a stretch, as software like the Atlas Line Indicator is really a price guide; indicating what type of trade to take (long or short) only if price confirms the action. In order for an indicator to be considered compatible with price action, the indicator must:
-Operate and produce signals in real-time not after the fact.
-Be compatible with price as it moves on the chart
-Produce non-conflicting signals that whipsaw a trader
Indicators look pretty and have lots of colors. The question is do they really help, or do they create dependency for traders? Lets first understand what an indicator does.
A trading indicator needs price to first to make a move up or down. Once this move is made the Indicator takes what just occurred and plots a point line bar graph on the chart. The indicator by definition is already late in providing information to a trader about a move up or down in the market which has already occurred. Indicators also have another huge issue which John Paul at DayTradeToWin educates his traders on. Which parameter is right for the market being traded? What has worked in the past, will most likely not work in the future. If the indicator in question has been optimized with historical data, then how will history relate to the forward looking performance when traded? This becomes the issue at hand.
At the moment It seems price action has the advantage with the comparisons made. This is just Round 1 and the following articles will provide more info, but for now lets understand what each contestant stands for and what each brings to the table.
Price action trading:
- Is free a trader does not need to extra software. Candles, bars, dots or any other chart price symbol will provide ample information for price action traders.
- Can be used on any market at any time under any circumstances (E-Mini S&P, Forex, stocks, other commodities, futures and currencies).
- Can be used with any trading software (NinjaTrader, TradeStation, MetaStock, etc.).
- Is fast price lag is irrelevant, old data will not obstruct your trading.
- Is versatile price action trading methods can be combined for a coherent trading system that is free of conflicting data.
- Must take time to learn, and understand how to trade it. Education is needed to master the methods and practice is key. The Cost is not cheap and is compared to a semester in college.
Indicator-based trading:
- Is not free most indicators are commercial.
- Lags behind price data based on the past is unlikely to be of assistance in the present and the future in an ever-changing market. Until data can be transferred instantaneously across any distance, this will be a consistent outcome.
- Often produces conflicting signals and hesitation of when and how to perform trades.
- Compatibility is dependent upon the indicators programming; only certain markets and / or trading software may be supported.
- Subject to the law of overuse the more traders that use an indicator, the more a market will adapt in retaliation to its overuse, thus rendering it ineffective. Price action is free from such boundaries as it is based on watching the resulting changes in price.
- Easy to use, and follow. A no brain-er, nothing to think about and only following the signals is needed.
While Price Action trading may be free, it may take a trader quite a while of practice (and a few losses) to determine what works. The logical next step in preventing losses is pursuing a form of day trading education. Indicators are a dime a dozen and most focus on following the heard. DayTradeToWin.coms beginner to advanced educational program, also known as Private Mentorship, features one-on-one trading from an experienced price action trader. The Program includes exact instructions on scalping methods, filtering trades, trading the news, and much more. Six weeks of live tutoring at the students own pace is much more effective in creating a self-sufficient day trader than any combination of indicators. Lets see what happens in Round 2 of Price Action VS Indicators.
by: daytradetowin
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