What is Price Action????

[ektrader]

Hey ton22 and splitlink,
Glad I could inspire you. Firstly , I dont have any good books to recommend because I learned it on my own and with the help of other traders (mostly in there 60's). Price action was how I first started trading. I didn't use indicators because I didnt know any better. The traders that helped me never used them so I didnt even know what most of these things were. I was extremely successful right off the bat. My strategy was very crude but effective. In the begining, I was taught that the safest place to take trades is at support and resistance(S/R). I didnt know how to figure it out. The S/R numbers were given to me daily by a buddy. I would just watch the price tick up and down until it reached the numbers. If the market turned at those numbers, I would make a mental note of it and wait for it to happen again. If it did, I would buy as many put/call contracts my buying power would allow. That's it. This worked nearly every time for about the first 5 months. I thought I was a genius and I was making a killing! Then reality set in.

I was so used to winning I never really learned how to control my losses. I would hold bad trades thinking to myself "I'm always right, I got this down pat!". At first, I just thought my strategy had ran it's course and I needed to learn something new. This acually made things worse to an extent. I did learn some valuable skills (trendlines, pattern recognition the impotance of a few moving averages). But most of it wasn't valuable for my style of trading. I learned how to use the MACD, Stochastics, ADX, Bollingerbands, multiple timeframes etc.... All of these indicators are just tools to help you see price action and S/R more clearly. If you learn it on your own you don't really need this stuff. Indicators will get you in either too early, or too late. This is why you sit through pain(watching your trade go negative and possibly getting stopped out.) while you wait for the move to go your way. Now,I'm back to my old strategy with better success. I see my trades much clearer because I use tick charts. (No more nerve racking memorization). Using price, you can get in and out of the market with the precision of a sharp knife using tight stop losses. You either achieve results immediatey, get stopped at breakeven or take a very small loss. Anyway, sorry for being long winded. I get excited taking about trading.

To Answer you guys' questions: Yes, I consider myself successful trading price action. I do about 20 trades a day. I'll lose an average of 3 ticks on 4 or 5 trades. I'll break even on 7 or 8 trades. I'll make 5 or 6 ticks on 4 or 5 trades, and I'll catch about 30 or 40 ticks on 2 or 3 trades. (THAT's THE MONEY SHOT) Yes, people are out there making consistant money. (Hell, traders on the floor don't even use charts!)
Bollingbands(I believe this is a S/R study, not overbought oversold)? There okay I guess but it's an approximation. Price action will tell you the exact price to go long and short. Learning how to draw trendlines properly will eliminate the need for bollingerbands.

What markets I trade? Most of the futures products, but the Russel 2k is my favorite. I never trade the S&P. (Don't be shocked. In my opinion, you make money easier with some of the slower contracts)

What's on my charts? I use a candlestick tick chart set at 133, 512 ,1600 or 3600 ticks.(timeframe charts require more guess work which is probably why many people don't trade price action.) Depending on which furutes product I'm trading and how fast the market is moving. I use the 12,24,50 period MA. I don't use these as entry exit signals. Just to get the General market direction. I also Keep one hourly chart to the side with the MACD on it. I only use it to spot a divergence in price, because I know it's a powerful setup. If I don't see a divergence. I cut it off. My chart is basically clean except for trendlines I draw myself and the 3 MA's.

I set up my chart, draw my S/R trendlines, and I'm ready to trade. Well ,market is almost open. Time for daddy to bring home the bacon.

Good luck guys

 

[ton22]

Thanks ektrader,

Very good of you to share all that with us! Currently i'm just saving up a bit of money with which to begin trading for real using the price action techniques i've nearly mastered on demo accounts. have you any words of wisdom or suggestions for a newbie starting off trading on price action alone???!!

 

[ektrader]

Stick to your guns and never feel like you need this and that. Learning this way first is gonna shorten your curve tremendously. You'll soon see why the indicator guys (most not all) get slaughtered.

1) Master drawing trendlines
2) Learn to use the tick chart
3) Study Charts, study charts, study charts
4)When on you're on your practice account, learn how to take "zero" losses or breakeven. This is the most important part of any trading. Don't believe the hype about, "the trade needs room to breathe" that's BS (no more than 5 or 6 ticks, not points). If you're not seeing results immediately (1 to 2 minutes), you are in too early/ late or just plain wrong. Period. Hope this helps.

By the way. I caught 70 ticks today. (it was easy though cause the market trended up all day)
4 Trades. 1 loss for 3 ticks. 2 break even. 1 for 37 ticks, and 1 for 35 ticks.

Happy trading

 

[Splitlink]

Hey ton22 and splitlink,
Glad I could inspire you. Firstly , I dont have any good books to recommend because I learned it on my own and with the help of other traders (mostly in there 60's). Price action was how I first started trading. I didn't use indicators because I didnt know any better. The traders that helped me never used them so I didnt even know what most of these things were. I was extremely successful right off the bat. My strategy was very crude but effective. In the begining, I was taught that the safest place to take trades is at support and resistance(S/R). I didnt know how to figure it out. The S/R numbers were given to me daily by a buddy. I would just watch the price tick up and down until it reached the numbers. If the market turned at those numbers, I would make a mental note of it and wait for it to happen again. If it did, I would buy as many put/call contracts my buying power would allow. That's it. This worked nearly every time for about the first 5 months. I thought I was a genius and I was making a killing! Then reality set in.

I was so used to winning I never really learned how to control my losses. I would hold bad trades thinking to myself "I'm always right, I got this down pat!". At first, I just thought my strategy had ran it's course and I needed to learn something new. This acually made things worse to an extent. I did learn some valuable skills (trendlines, pattern recognition the impotance of a few moving averages). But most of it wasn't valuable for my style of trading. I learned how to use the MACD, Stochastics, ADX, Bollingerbands, multiple timeframes etc.... All of these indicators are just tools to help you see price action and S/R more clearly. If you learn it on your own you don't really need this stuff. Indicators will get you in either too early, or too late. This is why you sit through pain(watching your trade go negative and possibly getting stopped out.) while you wait for the move to go your way. Now,I'm back to my old strategy with better success. I see my trades much clearer because I use tick charts. (No more nerve racking memorization). Using price, you can get in and out of the market with the precision of a sharp knife using tight stop losses. You either achieve results immediatey, get stopped at breakeven or take a very small loss. Anyway, sorry for being long winded. I get excited taking about trading.

To Answer you guys' questions: Yes, I consider myself successful trading price action. I do about 20 trades a day. I'll lose an average of 3 ticks on 4 or 5 trades. I'll break even on 7 or 8 trades. I'll make 5 or 6 ticks on 4 or 5 trades, and I'll catch about 30 or 40 ticks on 2 or 3 trades. (THAT's THE MONEY SHOT) Yes, people are out there making consistant money. (Hell, traders on the floor don't even use charts!)
Bollingbands(I believe this is a S/R study, not overbought oversold)? There okay I guess but it's an approximation. Price action will tell you the exact price to go long and short. Learning how to draw trendlines properly will eliminate the need for bollingerbands.

What markets I trade? Most of the futures products, but the Russel 2k is my favorite. I never trade the S&P. (Don't be shocked. In my opinion, you make money easier with some of the slower contracts)

What's on my charts? I use a candlestick tick chart set at 133, 512 ,1600 or 3600 ticks.(timeframe charts require more guess work which is probably why many people don't trade price action.) Depending on which furutes product I'm trading and how fast the market is moving. I use the 12,24,50 period MA. I don't use these as entry exit signals. Just to get the General market direction. I also Keep one hourly chart to the side with the MACD on it. I only use it to spot a divergence in price, because I know it's a powerful setup. If I don't see a divergence. I cut it off. My chart is basically clean except for trendlines I draw myself and the 3 MA's.

I set up my chart, draw my S/R trendlines, and I'm ready to trade. Well ,market is almost open. Time for daddy to bring home the bacon.

Good luck guys

Yes, well, I'm going to forget your method! All this tick stuff seems a bit complicated to me and far too fast for my age. But thanks for the moving averges. I'll look at those, tomorrow.

Hope that you had a good day.

Split

 

[ektrader]

I understand Split, can't teach an old dog new tricks. The ticks have nothing to do with speed. They allow you to visually see how many times the market tests each price level. So you have more confidence where to go long/short/ place stops.

Happy trading

ektrader

 

[ton22]

Stick to your guns and never feel like you need this and that. Learning this way first is gonna shorten your curve tremendously. You'll soon see why the indicator guys (most not all) get slaughtered.

1) Master drawing trendlines
2) Learn to use the tick chart
3) Study Charts, study charts, study charts
4)When on you're on your practice account, learn how to take "zero" losses or breakeven. This is the most important part of any trading. Don't believe the hype about, "the trade needs room to breathe" that's BS (no more than 5 or 6 ticks, not points). If you're not seeing results immediately (1 to 2 minutes), you are in too early/ late or just plain wrong. Period. Hope this helps.

By the way. I caught 70 ticks today. (it was easy though cause the market trended up all day)
4 Trades. 1 loss for 3 ticks. 2 break even. 1 for 37 ticks, and 1 for 35 ticks.

Happy trading

Thanks for the tips ek trader!
Well done with your trading, thats a pretty handsome result by anyones standards which makes me even more sure that i'm on the right track trading through price action, well i hope so anyway! sometimes i find Fibs can be quire useful in addition to support/resistence lines, do you have on comments on this?

 

[ektrader]

Thanks for the tips ek trader!
Well done with your trading, thats a pretty handsome result by anyones standards which makes me even more sure that i'm on the right track trading through price action, well i hope so anyway! sometimes i find Fibs can be quire useful in addition to support/resistence lines, do you have on comments on this?

Fib are S/R lines. Its' just another study. When you master rule number 1, you'll see that your lines will match up with fib, pivot points, and other S/R studies from time to time. After you draw your own lines. If you see that they match up with a particular S/R study. Pay close attention to that level because it should be a strong one. But do you really need those studies? NO! The most accurate S/R line is price. Fib lines are another crutch to help traders find possible turning points. Continue your study of price action and your going to realize you don't need it. You'll be one of the professionals taking advantage of certain levels and "fading" the rookies.

Happy Trading

Ektrader

 

[Splitlink]

Fib are S/R lines. Its' just another study. When you master rule number 1, you'll see that your lines will match up with fib, pivot points, and other S/R studies from time to time. After you draw your own lines. If you see that they match up with a particular S/R study. Pay close attention to that level because it should be a strong one. But do you really need those studies? NO! The most accurate S/R line is price. Fib lines are another crutch to help traders find possible turning points. Continue your study of price action and your going to realize you don't need it. You'll be one of the professionals taking advantage of certain levels and "fading" the rookies.

Happy Trading

Ektrader

I have never seen the point of the Fib percentages. You might as well use one of your own. I'd bet that if you decided to use 42.1% 31.8%, or whatever number you thought of, the lines would throw up some interesting turn points, as well. Fib is an interesting
statistical tool, but the 50% line that is very popular, is not one of the components of Fib.

 

[ektrader]

I don't see the point of any of it since what you need is right in front of your face. But since a lot of other traders use these levels. It's sometimes profitable to pay attention when your trendlines match up. It should give your reverse trade more energy because you know the fib players will be playing along with you. I personally, never pull up Fibs. I'm confident enough in my strategy to know where the strongest levels are most of the time. This just comes with experience.

Ektrader

 

[Gogol]

What's on my charts? I use a candlestick tick chart set at 133, 512 ,1600 or 3600 ticks.(timeframe charts require more guess work which is probably why many people don't trade price action.) Depending on which furutes product I'm trading and how fast the market is moving. I use the 12,24,50 period MA. I don't use these as entry exit signals. Just to get the General market direction. I also Keep one hourly chart to the side with the MACD on it. I only use it to spot a divergence in price, because I know it's a powerful setup. If I don't see a divergence. I cut it off. My chart is basically clean except for trendlines I draw myself and the 3 MA's.

I set up my chart, draw my S/R trendlines, and I'm ready to trade. Well ,market is almost open. Time for daddy to bring home the bacon.

Good luck guys

Hi Ektrader,
Can you clarify how you determine entry point using all those charts ? :smart:
And how do you react if price reach, lets say resistance on 512 tick chart? Waiting to get it thru or selling on that point :?:
Thanks for your time...

 

[ektrader]

Hi Ektrader,
Can you clarify how you determine entry point using all those charts ? :smart:
And how do you react if price reach, lets say resistance on 512 tick chart? Waiting to get it thru or selling on that point :?:
Thanks for your time...

I don't use all the charts at once. First I try to get a feel of how fast the market is moving. It's really not that important. I prefer the 1600 or the 3200 but sometimes when the market is slow and choppy, I'll use the slower time frames. I really just use my experience to gauge. If my tick chart goes to a level that i have identified as resistance, I will place a short order either at that exact price or a few ticks before. (Just depends on where the resistance is) and I wil place a stop about 5 to 10 ticks out. Once the order is placed, I watch the price action. I'm expecting immediate results. Most of the time, the price will bounce between +2 or 3 ticks to -2 or 3 ticks. If this lasts longer than a minute or two in a fast market. I just get out at breakeven or a small loss. Now if the trade starts to move as expected (+8 to 10 ticks<). I immediately start pushing my stop to the breakeven point. If I don't feel like I'm getting my results fast enough. I'll just take whatever the market gives me and wait for the next trade. If it starts to trend, I trail stop each tick candle manualy. My strategy does have a lot of situational rules that I follow so excuse me if I'm missing some detail. I've never really tried to explain it to anyone before.

Happy trading

Ektrader

 

[Gogol]

I don't use all the charts at once. First I try to get a feel of how fast the market is moving. It's really not that important. I prefer the 1600 or the 3200 but sometimes when the market is slow and choppy, I'll use the slower time frames. I really just use my experience to gauge. If my tick chart goes to a level that i have identified as resistance, I will place a short order either at that exact price or a few ticks before. (Just depends on where the resistance is) and I wil place a stop about 5 to 10 ticks out. Once the order is placed, I watch the price action. I'm expecting immediate results. Most of the time, the price will bounce between +2 or 3 ticks to -2 or 3 ticks. If this lasts longer than a minute or two in a fast market. I just get out at breakeven or a small loss. Now if the trade starts to move as expected (+8 to 10 ticks<). I immediately start pushing my stop to the breakeven point. If I don't feel like I'm getting my results fast enough. I'll just take whatever the market gives me and wait for the next trade. If it starts to trend, I trail stop each tick candle manualy. My strategy does have a lot of situational rules that I follow so excuse me if I'm missing some detail. I've never really tried to explain it to anyone before.

Happy trading

Ektrader

Thanks for that,
I really like it, cause I've been dooing similar thins, not exact but pretty close... And I never used indicators or some others strange stuff, and I was thinking I'm doing something stupid .

 

[ektrader]

Thanks for that,
I really like it, cause I've been dooing similar thins, not exact but pretty close... And I never used indicators or some others strange stuff, and I was thinking I'm doing something stupid .

Nahh man. You're just a natural:clap:

 

[Gogol]

Nahh man. You're just a natural:clap:

I just can't explain to myself, what's the advantages to use tick chart instead of 5 or 1 min ? I found them too uncertain... Tell me I'm wrong

 

[ektrader]

I just can't explain to myself, what's the advantages to use tick chart instead of 5 or 1 min ? I found them too uncertain... Tell me I'm wrong

Because ticks are real. Time could (not always but often) be misleading. Tick charts give you cleaner chart patterns, especially during slow or choppy market action. With the tick chart, I know exactly what happen in each price candle.

Let's assume I'm set at 1600 ticks per candle stick. That tells me that there are 1600 trades in each candle. Assume that price is rising and then stalls at a certain price, and then there are 3 candlesticks in a row were the market stalls at that same price and then turns around and goes down. This tells me that for the last 4800 trades, the market could reach but not breach that price. This is extremely powerful information that you can't get from a time based chart. Now, I wait for the market to test that price level again. When it does test that exact price, I go short and expect immediate results. This is the time most indicator guys are looking for confirmation, waiting for things to cross, face down, etc.... The only confirmation I need is knowing that the last time the market reached that level, it could not breach it. Even with 4800 trades near that level.

This is a powerful trading technique but most of all, you have to do what's comfortable for you. If you're consistently profitable using 1 or 2 minute bars, or filling your screen with all kinds of indicators. Then by all means, stick with what works. Nobody trades exactly the same way.

Happy Trading

Ektrader

 

[ton22]

Hi ektrader,

I was just wondering how far behind the current price do you usually move your trailing stop? Also, how do you catch a big move, I mean do you just let the trade continue to run until it hits one of your predetermined resistence lines in an up-trend for example? or do you just let the trade ride out while continually moving your trailing stop behind it?

Hope you don't mind answering these kind of questions about your strategy.

ton22

 

[ektrader]

Hi ektrader,

I was just wondering how far behind the current price do you usually move your trailing stop? Also, how do you catch a big move, I mean do you just let the trade continue to run until it hits one of your predetermined resistence lines in an up-trend for example? or do you just let the trade ride out while continually moving your trailing stop behind it?

Hope you don't mind answering these kind of questions about your strategy.

ton22

I'm just a regular guy man. I don't mind sharing strategy. That's what we're all here for. Anyway......

I usually trail it by about 3 or 4 ticks if I think it's trending but to be honest, it's very subjective for me. I only catch a big move if the market is moving really fast in my direction. I usually end up shaking myself out during consoidation periods. Then when it breaks, I wait for a pull-back and jump back in.

I also take trades in tight ranges (a no no for most traders) This is easy to do following price action. In those instances I just take what the market gives me ( 5,6 ticks or breakeven). As soon as I see weakness, I close the position. Period. I've left a lot of money on the table doing this but I don't care. There will be plenty of opportunities through out the trading day.

When I see a trade at the very top or bottom of what I consider a larger range, I treat it a little differently. If it's early and I haven't made any money yet, I use the same strategy as mentioned above. If I've already had a good day, and that trade comes up. I push my stop a few ticks in front of the breakeven point and then just let it ride blindlessly. At that point, I look at it as a free trade. If I gain 1000 ticks, cool. If I get stopped out early. I'm fine with that also. It's like a bonus round for me.

I know my money management technique sounds kind of wacky and it probably is. But it works for me. My goal is to take 20 to 30 ticks per day and I usually pass that easily.(Sometimes before the market even opens.) I also like to take zer0 losses. Iv'e blown up my account before and I'll never let it happen again. The Ru$$el 2000 Future contract (/TF) is $10 a tick (I trade others but the Russel is my favorite) so I do ju$t fine with my strategy and money management.

Happy Trading

Ektrader

 

[Gogol]

Because ticks are real. Time could (not always but often) be misleading. Tick charts give you cleaner chart patterns, especially during slow or choppy market action. With the tick chart, I know exactly what happen in each price candle.

Let's assume I'm set at 1600 ticks per candle stick. That tells me that there are 1600 trades in each candle. Assume that price is rising and then stalls at a certain price, and then there are 3 candlesticks in a row were the market stalls at that same price and then turns around and goes down. This tells me that for the last 4800 trades, the market could reach but not breach that price. This is extremely powerful information that you can't get from a time based chart.
Ektrader

Hi Ektrader,
Do you think the number of trades per candle more important than volume per candle? after all it could be 1600 trades with 1600 contracts, comparing with 1 trade with the same volume....
Just trying to say maybe it's better to use certain numbers of contracts per candle instead of numbers of ticks? :!:

 

[ektrader]

You could possibly be right but remember, it's just a gauge. We're trying to trade with the best of our ability and the information that's available in front of us. It's an art not a science. This strategy works for me and I'm confident in what I'm looking at. If you appreciate it, give it a shot. If it dosent work for you, just keep doing what your doing. Also, I'm a scalper, volume isn't as important with the short timeframes I trade. Buy the time you analyze the volume. The move may done. I've tried before, and trust me it's not worth the effort using the ticks. Just keep your stop losses tight.

Ektrader

 

[ton22]

You could possibly be right but remember, it's just a gauge. We're trying to trade with the best of our ability and the information that's available in front of us. It's an art not a science. This strategy works for me and I'm confident in what I'm looking at. If you appreciate it, give it a shot. If it dosent work for you, just keep doing what your doing. Also, I'm a scalper, volume isn't as important with the short timeframes I trade. Buy the time you analyze the volume. The move may done. I've tried before, and trust me it's not worth the effort using the ticks. Just keep your stop losses tight.

Ektrader

hi ektrader,

you metioned there that you are a scalper. i understand what a scalper is but i've always been interested in how people deal with sitting at a screen all day waiting for set ups to occur. obviously if your making money its an added incentive!! what i'm really asking is could you describe the attributes needed to be a scalper using a strategy like yours and maybe gimme an idea of a typical days trading for you. thanks ek!