Is it true, you can trade without indicators and candlesticks?

[Bloodhound]

I been reading posts across the net about how some traders don't use indicators like moving averages as they are lagging indicators. Only taking past actions to predict future price movement. Some traders trade using candle sticks, the tape, pivot points, Fibonacci lines, while others trade doing all the above but no candlesticks. Then there are traders who only trade the tape. Is this all really possible?

I can't find hardly an information on tape reading, where do I start?

They say to trade the market you need to learn price action which is No1 way to predict future price movement and then you can master order flow and finally learn to read the tape to become a hot shot trader that can trade without indicators and choose whether or not to trade with candlesticks. This is all sounds awesome, but is it possible?

My trading has evolved this year to be based primarily (in fact only) around order flow. DT is spot on that it is near on impossible to find out much about what you are interested in on the net - trust me I've tried!! I'm not into giving advice as I'm nowhere near qualified to give any but the thing that helped me was to try and learn where are orders are likely to be, what types of orders will be there, why they will be there and who has placed them there. Sound vague - well I'm afraid it is. The best thing I read is that to trade the way you are talking about is a mindset thing - you can't learn it out of a book.

Sorry not to be more helpful. PM if you have any questions.

 

[wallstreetwarrior87]

but the thing that helped me was to try and learn where are orders are likely to be, what types of orders will be there, why they will be there and who has placed them there. Sound vague - well I'm afraid it is. .

Not vague at all. Very good post

 

[Bloodhound]

Not vague at all. Very good post

Sorry by vague I meant that 'orderflow' trading is not a 'system' that will tell you where and when to get in and out of trades (well not in the way most people look at 'systems'). It is a way of looking at what is going on at any given point in time to assist one in coming to the correct conclusions about what will / may happen next. It is just another piece in the jigsaw, albeit in my experience the most important piece.

 

[rawrschach]

you know I hear they have broadband in Nungwi these days, hint hint, nudge nudge

carry on

 

[Bloodhound]

you know I hear they have broadband in Nungwi these days, hint hint, nudge nudge

carry on

When do you open the office????

 

[spy74]

Price just seems to be attracted to and do alot of work around certain ref points, whether they be old highs/lows, range breakout points, pivots, etc etc. maybe price will bust straight through a level one time for one reason or another, then do alot of work on a retracement, or do the work initially before pushing through, or bounce straight off it - whatever. the point is that they are levels that attract activity and a decision of some sort by various market participants, therefore they are relevant and important.

But whether you spot these levels and the associated activity by looking at charts and candles, or whether you spot them by noticing the increased activity levels in the order flow and the level of competition at certain price points - i reckon 9 times out of ten, we'll all be looking at the same ref point because if your involved in the market you can't help but notice them.

Price action is price action - I don't think it really matters by what means you observe it, what matters how you interpret it and trade it.

 

[Windowsill]

it looks to me like your struggling to understand when it will hold and when it will break. the simple answer is just go with the flow and never try step in front of the market.

the question and focus isn't and shouldn't be if it is going to hold or not but what price is telling you at those areas that's important. too many people place market orders lets say for instance on support hoping and wishing it will break just because price has already run some distance. that is like flipping a coin. as long as buyers are around price will continue to move up, test resistance, break resistance, test support and start the cycle again until the buyers lose control. that's why support and resistance is so important. every time price enters support\resistance its like drawing a line in the sand. who is in control? the buyers or the sellers? support and resistance is like the front line of an army...

if price is at support look for signs to buy, if price is at resistance look for signs to sell. but that's just surface analysis. you also need to consider market context amongst other things for each trade too

"look for signs to sell".....so why bother with support & resistance at all. Its perhaps really saying, I should start concentrating now as the price is reaching a certain level...you should be concentrating all the time ....support and resistance "works" 50% of the time...like any other point on the chart. Thats my experience anyway.

 

[forker]

"look for signs to sell".....so why bother with support & resistance at all. Its perhaps really saying, I should start concentrating now as the price is reaching a certain level...you should be concentrating all the time ....support and resistance "works" 50% of the time...like any other point on the chart. Thats my experience anyway.

because without those levels if you just execute a trade based on a buy\sell signal you basically flipping a coin. the reason for this is simple. where are the buyers and sellers? do you really think they are at any old place. do you think the entire market is seeing what your seeing?

proposing that support\resistance works 50% of the time is a rather broad statement. people tend to trade it entirely wrong. every day i see traders posting trades such as a buy when price is sitting at resistance. if that is how you are measuring 50% then sure it is no different than flipping a coin. i doubt you will find the same ratio of success if you instead looked for a sell signal at that area. whether that signal is based off an indicator or better still a quality price bar showing that sellers have taken control. i need to stress again that there is more to this than what i am explaining here as you need to add discretion among other things.

 

[Windowsill]

because without those levels if you just execute a trade based on a buy\sell signal you basically flipping a coin. the reason for this is simple. where are the buyers and sellers? do you really think they are at any old place. do you think the entire market is seeing what your seeing?

proposing that support\resistance works 50% of the time is a rather broad statement. people tend to trade it entirely wrong. every day i see traders posting trades such as a buy when price is sitting at resistance. if that is how you are measuring 50% then sure it is no different than flipping a coin. i doubt you will find the same ratio of success if you instead looked for a sell signal at that area. whether that signal is based off an indicator or better still a quality price bar showing that sellers have taken control. i need to stress again that there is more to this than what i am explaining here as you need to add discretion among other things.

I agree. 100% success probably could be found if you were aiming for 1 point on the rebound or the continuation as both are likely to happen.....how do we measure success? 50% of the time was my rather weak attempt to say nothing is certain

 

[forker]

I agree. 100% success probably could be found if you were aiming for 1 point on the rebound or the continuation as both are likely to happen.....how do we measure success? 50% of the time was my rather weak attempt to say nothing is certain

this is where market context + discretion comes into play. you simply cannot take every signal at those areas. As for measuring success, that all depends on how skilled you are at assessing each situation and only taking those A grade trades. I can easily see how 50% is achieved when you simply take a signal without fully understanding the risk which is not based off your stop positioning but rather the market context.

 

[rawrschach]

When do you open the office????

As soon as I can afford a deck chair and a solar charger for my laptop =D

 

[Bloodhound]

The one thing that doesn't seem to have been touched on is the part that human emotions, especially fear, play in this game. Learning to understand what emotions are in play at any one moment in time and how to capitalise on these emotions is extremely important.

No amount of TA, candlesticks, MA's, RSI's or whatever is going to replace a horizontal line and an understanding of what is going on and what will go on when price reaches that line.

I'm not for one second knocking TA etc. as I know a number of traders who are very successful using TA although I have a sneaking suspicion that they may not be successful for the reasons they think they are but I am way too new at this to be making rash statements like that so take that with a pinch of salt!

To the OP: to add to my post on orderflow, I would possibly suggest doing some research into the effect that greed and fear have on the markets. You might be very surprised at how simple some of this can become and it has nothing to do with technical analysis.

All in my very humble opinion.

 

[Splitlink]

That is, partly, why I use charts but, please, don't tell me that I am that thick that I would be doing this, all these years, if I was losing money.

I realise that I may have offended some by expressing myself badly. I'm sorry about that.

 

[Prawnsandwich]

The one thing that doesn't seem to have been touched on is the part that human emotions, especially fear, play in this game. Learning to understand what emotions are in play at any one moment in time and how to capitalise on these emotions is extremely important.

No amount of TA, candlesticks, MA's, RSI's or whatever is going to replace a horizontal line and an understanding of what is going on and what will go on when price reaches that line.

.

What about a couple of narrow range bars / candlesticks, followed by a 2 or three wide range bars supported by a large increase in volume......does this not convey what emotions are in play ?

What about a pin bar at an important S/R level - does this not convey whether bulls / bears are dominant at that point ? ie buying or selling pressure....

 

[kimo'sabby]

For example, I dont doubt whotsoever that someone like Arabiannights makes money every single day, but then, I cant imagine that id consider what he does to be 'trading'.

No disrespect to him, but I remember when we were in the old Chatsy room, he opened a spreadbet account for a laugh, and he couldn't get a thing right! He admitted it himself. His posted trades would always move against him.


Brilliant!

Arabian can't move his own money. Demo money - YOUR money! Arabians employers money - HIS money!

See where this is going!?

 

[Prawnsandwich]

My trading has evolved this year to be based primarily (in fact only) around order flow. DT is spot on that it is near on impossible to find out much about what you are interested in on the net - trust me I've tried!! I'm not into giving advice as I'm nowhere near qualified to give any but the thing that helped me was to try and learn where are orders are likely to be, what types of orders will be there, why they will be there and who has placed them there. Sound vague - well I'm afraid it is. The best thing I read is that to trade the way you are talking about is a mindset thing - you can't learn it out of a book.

Sorry not to be more helpful. PM if you have any questions.

Can DT not mine the necessary data and backtest this methodology ?

 

[Prawnsandwich]

Jon - a car has an engine. If it had 30 bunny rabbits under the hood, it would not function as a car, regardless of the drive.

30 bunny rabbits = indicators & candlesticks

So there you have it.....all those consistently profitable traders using charts, perhaps with an indicator or two......they just dont work as DT has proclaimed (on any number of threads on T2W)....may as well get a few bunny rabbits, get them to run around a bit and base your entries and exits on the resulting bunny formation.....

 

[Prawnsandwich]

candlesticks and indicator are 99% voodoo... do you think george soros sold the pound short because he'd seen a head and sholders pattern... of course not...

Well, we cant all be George Soros, and I wouldn't say there are too many on this forum.....or maybe there are ? hmmm

 

[Prawnsandwich]

That's a heartwarming post PS. I especially liked the part how you'd teach me how to trade but.....

Using something that is right just as often as it is wrong does not interest me. DT didn't fail at textbook TA, textbook TA failed at DT.

This textbook / pure TA phraseology seems to be an invention of yours.....by this do you mean the DT failed TA approach ?

I will give you the opportunity to prove your point. Lay down 1 specific candlestick pattern, explain to us all why you think it works (and none of this "it just does nonsense") as well as how often the pattern is succesful and how often it fails. This should be fairly easy if you believe in them.

Many thanks for allowing me an opportunity to prove my point....its hugely appreciated , really, but TBH I couldn't be arsed showing you how to day trade using a very simple effective candelstick / bar pattern....and I'm not talking about any complex pattern from Nisson....

The OP just referred to candlesticks, versus tape reading ie using a chart versus order flow......you then proclaimed to all that candlesticks / charting "dont work".

If you want a bar pattern perhaps take a look at Mr. Charts system as set out on here which is very simple but appears to be effective.....and is based simply on a bar continuation pattern....

Anyway, as has been stated by other posters here, you cant just blindy back test a method without taking account of context and other factors......particularly if you are approaching it with a bias...

In the meantime, I will re-iterate. Candlesticks in long term trading of equities mean very little because there are so many other things that will drive the price. All markets have different elements that drive the price. In equities, there is finite supply (i.e. float) which is unlike the futures markets. No candlestick proponent can explain why textbook TA can be used on an infinite supply and a finitie supply market in the same way other than "it just works". Perhaps you will be the first to explain why supply is irrelevant when using candlesticks.

What are you talking about...no one at any stage has suggested that supply is irrelevant....candlesticks are a very simple graphic representation of price, buying and selling pressures........long white candle - strong buying pressure, long red candle - strong selling pressure, etc etc you just don't seem to understand this...

Maybe this is where you went wrong with TA, you were blindly applying the more overly complex patterns without taking account of context or without incorporation into a sound trading strategy... which is borne out by your simplistic suggestion to blindly back test some theoretical pattern.....

Maybe you should backtest your own strategy, the "another bow for your quiver " approach which is linked in you signature section....as you seem to have a almighty chip on your shoulder when it comes to TA, frequently articulated on this forum...

 

[Prawnsandwich]

Any decent TA book (I'm thinking of Murphy...) will say that no one technical pattern/indicator should be used in isolation. in fact, from what i've read, confirmation with other TA indicators/patterns is one of the basic ideas of TA itself. Most say that good TA begins with a basic understanding of determining trend from observing price action (HH,HL,LH,LL etc etc), especially the trend of timeframes higher than the one from which you take your entries/exits off.

From there, you add other forms of TA, such as S&R, Fibs, Pivots, Oscillators etc etc to build a strategy which, when combining a few of these "indicators" together, ends up providing the components of a set-up which should have higher probability of success than if you used any one of them in isolation.

Even Nison et al say that candlesticks are simply another ingredient to add to a trading strategy mix - they're good for helping determine bullish, bearish, indecisive price behaviour, but no use at all for indicating how far prices will reverse/continue.

People tend to want to look for a set rule - ie, "always sell divergence of RSI with price", so they don't have to think and interpret the current market, when i think that even the guy that invented RSI would never use it in isolation like that.

If you are looking at RSI divergence, combined with (say) a pivot, and some bearish candlesticks, in the direction of a higher time-frame trend - that could be a good high prob set-up, where as selling RSI divergence alone in the face of a raging price action trend has a very high likelihood of failing (take it from someone who knows!)

This seems to be what DT fails to grasp....charts / candles / bars / indicators are not supposed to be used in isolation...its about incorporating these tools in a sound high probability method....