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

[Prawnsandwich]

Not sure I agree. It depends what you see when you look at it.

No. Its not up for agreement and it does not depend on what you see when you look at it - it is TA, the Chart is TA, look it up....

In fairness you should really understand what you are talking about before sprouting opinions....

Anyways, DT has proclaimed that charts "dont work" and profitable chart readers are only imaginary creatures existing within the realms of trading forums, which of course is the obvious and logical conclusion when he has failed to get any aspect of TA to work for him...

The secret apparently lies in the mystical world of tape reading, Level 2 and T & S ....

..... so you have been wasting your time with your "chart" unfortunately ....

 

[Splitlink]

Not sure I agree. It depends what you see when you look at it.

Sorry to disagree, but I believe that TA is information derived from the study of a chart. That's what you have shown us on your chart. I think that it is important to clarify what we all mean by TA, otherwise we could be talking cross purposes.

 

[spy74]

Sorry to disagree, but I believe that TA is information derived from the study of a chart. That's what you have shown us on your chart. I think that it is important to clarify what we all mean by TA, otherwise we could be talking cross purposes.

yep agree, TA is the study of market/price action through the use of charts - if you got a chart up (regardless of how price is visually represented on that chart), and your using it to help you interpret what's going on it the market you trade - you are engaging in TA in some way, shape or form.

 

[Prawnsandwich]

And yet you'll find very few, if any, books on TA which give a full explanation as to why BT would've sold at that point.

Not so sure, ...I'm second guessing Beachtraders approach but it would appear that there is a combination of factors - an overall lower high, followed by a congestion zone with resistance to break higher, indicating a period of indecision between bulls and bears or possible distribution, followed by a breakdown of a resistance line, indicating bears won out ......

Fairly basic stuff...

 

[neil]

Not so sure, ...I'm second guessing Beachtraders approach but it would appear that there is a combination of factors - an overall lower high, followed by a congestion zone with resistance to break higher, indicating a period of indecision between bulls and bears or possible distribution, followed by a breakdown of a resistance line, indicating bears won out ......

Fairly basic stuff...

Interpretation is the key, imho,which will produce as many opinions as there are individuals. If not so thens omeone would have automated such interpretations years ago and wrecked the markets
One might even say that trader psychology is the bigger factor in viewing the way a trader functions in the market of which his interpretation of TA is a (minor) part.

 

[Prawnsandwich]

Interpretation is the key, imho,which will produce as many opinions as there are individuals. If not so thens omeone would have automated such interpretations years ago and wrecked the markets
One might even say that trader psychology is the bigger factor in viewing the way a trader functions in the market of which his interpretation of TA is a (minor) part.

Well I agree psychology is a huge part of trading, but in relation to sticking to a trading plan, managing a trade, letting winners run, cutting losses short etc....

I'm sure there are plenty of profitable automated systems operating in the markets, even more so with the advent of high frequency trading......

TA is rarely / never about being 100% right or wrong, working or not working, its about probabilities, about getting an edge through a higher probability set-up....thats where money management comes in....to further increase probabilities on your side....it works if you have a positive expectancy and / or are consistently profitable....

 

[Prawnsandwich]

I haven't read this thread in detail and have just come across the previous two posts, but DT is correct, imho.
Level 2 T&S sometimes, not always and not in some stocks, can tell you what is LIKELY to happen BEFORE anything on a chart or conventional TA.
In my experience it gives a huge edge and is often much more significant and profitable than the TA almost everyone uses.
You can also use it as a scalper's entry into swing positions and will, as DT says, often get you out of trades just as they turn and those who use "pure" TA are left exiting later when the candle tells them what has ALREADY happened. They have a larger loss or a much smaller profit.
I'm not prepared to get into any argument about it, I use an unconventional sort of price action TA integrated with L2 T&S and am aware of background news and events and that integrated combination has worked very well for me for many years trading for my living.
Readers should think carefully about what DT has to say as, in my view, he is very capable and puts a great deal of valuable comment on this site.
Richard

Well to jump to support a particular view without reading the entire thread and taking on board both sides of the discussion seems a bit unreasonable.....

I'm sure that everyone agrees that reading L2 / T & S can provide an additional edge, particularly if you are scalping.....but this is not the argument.

And nobody is arguing that there are traders who trade successfully purely on the basis of the tape...

The discussion is DTs assertion that candles / charts / TA "dont work"

In any event L2 or DOM is not all its cracked up to be as it can easily be manipulated, as there are many ways for participants to disguise their true intentions......plus it can be very difficult to interpret...

 

[Charlton]

In the case of Grey1, i've seen his trading screen as he trades and makes a killing!

Agreed

He uses charts and TA to a DEGREE.
He makes lots of his money from SWING trading using FUNDAMENTALS.

The most important thing he considers, IMHO is risk. He uses position sizing derived from an analysis of the relative strength/weakness of stocks compared to the market. He analyses the market to determine what phase it is in and adjusts the strategy accordingly. He uses VWAP concepts to determine entry/exits.

The best thing is he has an automated engine that PRINTS money for him whilst he does other things! Its genuinely amazing.
I guess that's where we'd all like to be, although from my list, he is the only one who has that. very jealous, lol.

The automated engine, again fits in with risk analysis. It allows a diversifcation of risk by holding a larger portfolio, which would be dfficult to control manually. It also allows for a variety of strategies to be used according the current market conditions. It also removes the psychogical disturbances to one's strategy.

However it should be pointed out that the most important thing about an automated engine is not the tool and not your ability to program, but the underlying strategies derived manually in the first place.

Running strategies in an automated engine inevitably requires the use/creation of indicators, because automation requires a programmed logic to operate. These are not necessarily your "common-or-garden" off the shelf indicators, but they are still in some sense indicators. To this extent "The Expert" had a point about a distinction between standard textbook TA indicators and his type of analysis. However I never really made a distinction, but really saw them all as different levels of sophistication/compexity.

I also do not really see any distinction between Price action analysis and indicators. If you look at a chart to study price action or look at T&S or DOM, I think that you are constructing a "mental indicator". It may have a different kind of quality than, say, a simple indicator like MA. It may be extremely difficult to automate through programmed logical code and would probably require at least neural programming, but still if you are using PA to either predict price movement or to determine entries or exits then it becomes in effect a mental indicator.



Charlton

 

[forker]

They are visible on the DOM/T&S and NOT on the chart. [/B]

true but then buyers and sellers are always visible on the DOM/T&S. You say they not on the chart but they are in price action (maybe not as clear but undeniable).

Level 2 T&S sometimes, not always and not in some stocks, can tell you what is LIKELY to happen BEFORE anything on a chart or conventional TA.
In my experience it gives a huge edge and is often much more significant and profitable than the TA almost everyone uses.
You can also use it as a scalper's entry into swing positions and will, as DT says, often get you out of trades just as they turn and those who use "pure" TA are left exiting later when the candle tells them what has ALREADY happened. They have a larger loss or a much smaller profit.

if price is at resistance "hypothetically speaking" and you see on L2 a wave of buy orders flooding in but a massive set of sell orders waiting just above the high. I guess this is what you mean by seeing what is likely to happen before the chart does. so while you watching that on L2 i am looking at the chart. you can see what's likely to happen and i am just sitting on my hands waiting for something to happen.

price pushed higher through resistance and the sell orders flood in and wipes them all out indicating sellers have arrived. now perhaps you are in the trade already with a small stop. lets just get one thing out the way before i continue, nothing is stopping even a larger wave of buyers coming in to wipe out those sellers. so the point being your trade that is on is as random as my trade "yet to be placed".

on the charts i see a sell signal and my order is executed and price begins to flow. at this point in time your trade is more in profit than my trade but, if we have both done our homework there is still room to go.

price falls and enters a level where it is likely to find trouble. now either you get out\i get out\we both get out\we both move our stops locking in profit.

at this point the only difference between your trade and mine is a little more profit!

so how can you tell me or anyone on this forum for that matter that you have a larger edge using L2 than trading off the charts. firstly lets look at the fact that you are stepping into a trade sooner which means you are basically stepping into the market based off a set of orders that pointed to a likely sell. Your edge is actually nothing more than an early warning sign. the fact remains that anything can happen and your trade can be blown off as easily as it was put on and all it will take is a fresh set of buy orders that are large enough to absorb the market taking it higher.
now as a chart trader i go with momentum and yes i see things later than you do but one could easily see that i have more information that you at the time of my trade based on the fact that the market has moved.
as to your claim that you can get out before me is a load of rubbish. everyone knows that price repeats itself. price respects itself, price as printed on charts contains sufficient information to see those levels far in advance of the L2 does. L2 is in actual fact nothing more than a window into the order flow of here and now.
now dont get me wrong i am not saying the way you trade is a load of crap, there are many ways to skin this cat. what really annoys me and actually makes you look a little silly is the fact you claim yours is superior and that TA or any other conventional means dont really work. need i remind you that those L2 order flows whether they are buys\sells are not just plucked out of thin air. if your biased then thats completely natural but dismembering other forms of TA as not sufficient when you have no evidence of the fact

 

[DionysusToast]

Let me frame this another way.

I know a handfull of full time traders who trade the way people on forums aspire to - that is in outright positions 'predicting' with some success where price will go from one point in time to another.

These people in turn know many more full time guys as they have been at this a lot longer than me.

They all do something different, they all have a very good feel for the markets they trade. Some were taught, some were self-taught. Most are laid back (Mr Charts is near horizontal) yet one is neurotic.

There is one common thread when you speak to them. That is that they do not use the simplistic TA approaches discussed in trading books or on trading forums. In fact, they scoff at these. Some did go through that phase but some did not. With most, I have discussed how their peers trade and again it appears that they do not know anyone that has gone full time with the kinds of methods discussed on line and in the trading literature such as books by Alexander Elder.

With each one, what they did was a bit of a surprise. With the guys that are able to frequently predict reversal points way ahead of time, it actually seemed a bit 'magical'. It isn't magical at all, it's experience. It just seems magical after reading all the garbage us amateurs are fed through various forms of popular trading media.

Take it or leave it. Follow the common path or not.

Just dont be surprised if you get what everyone else gets when you do what everyone else does.

 

[forker]

The world is large and you talking about a few people. Sugar coating all TA as it stands in publications is no different than saying all action stories end the same way.
Leaving aside TA on forums as they consist mostly of unskilled traders is probably the best. TA is a vast topic and judging it collectively based on mostly u skilled forums and books is naive

 

[barjon]

..............They all do something different, they all have a very good feel for the markets they trade. Some were taught, some were self-taught. Most are laid back (Mr Charts is near horizontal) yet one is neurotic.

There is one common thread when you speak to them. That is that they do not use the simplistic TA approaches discussed in trading books or on trading forums. In fact, they scoff at these. Some did go through that phase but some did not. With most, I have discussed how their peers trade and again it appears that they do not know anyone that has gone full time with the kinds of methods discussed on line and in the trading literature such as books by Alexander Elder.............

toastie

yeah, that's my experience too - in fact i said in a thread (systems, schmystems) some time ago:

Apart from one guy who operates purely from instinct (and who must have been born with a lucky streak a mile wide) all the decent traders I know have a sound strategy and are systematic in the application of their strategy. But that's a far cry from being a slave to a system.

Yes, they've got rules. Yes, they've got conditions. It's all applied with a healthy dose of discretion and it's that discretion which brings home their bacon.

I was talking about systems, but for systems read TA - ie) none of them are slaves to TA.

You gotta remember, though, that the guys we're talking about are in the top echelons of the business. Just because an F1 racing driver doesn't need a speedometer to know how fast they're going (and might sneer at those who do) doesn't mean that lesser drivers can't use a speedo to good effect.

I have proved to myself time and time again that I simply do not have the talent to develop a "feel" for the market sufficient for successful trading. I need my artificial aids (TA) and I am happy enough with what it has brought me even though others could have done much better looking at the self-same trading opportunities.

jon

 

[forker]

toastie

yeah, that's my experience too - in fact i said in a thread (systems, schmystems) some time ago:

Apart from one guy who operates purely from instinct (and who must have been born with a lucky streak a mile wide) all the decent traders I know have a sound strategy and are systematic in the application of their strategy. But that's a far cry from being a slave to a system.

Yes, they've got rules. Yes, they've got conditions. It's all applied with a healthy dose of discretion and it's that discretion which brings home their bacon.

I was talking about systems, but for systems read TA - ie) none of them are slaves to TA.

You gotta remember, though, that the guys we're talking about are in the top echelons of the business. Just because an F1 racing driver doesn't need a speedometer to know how fast they're going (and might sneer at those who do) doesn't mean that lesser drivers can't use a speedo to good effect.

I have proved to myself time and time again that I simply do not have the talent to develop a "feel" for the market sufficient for successful trading. I need my artificial aids (TA) and I am happy enough with what it has brought me even though others could have done much better looking at the self-same trading opportunities.

jon

Well said

 

[Prawnsandwich]

Let me frame this another way.

I know a handfull of full time traders who trade the way people on forums aspire to - that is in outright positions 'predicting' with some success where price will go from one point in time to another.

These people in turn know many more full time guys as they have been at this a lot longer than me.

They all do something different, they all have a very good feel for the markets they trade. Some were taught, some were self-taught. Most are laid back (Mr Charts is near horizontal) yet one is neurotic.

There is one common thread when you speak to them. That is that they do not use the simplistic TA approaches discussed in trading books or on trading forums. In fact, they scoff at these. Some did go through that phase but some did not. With most, I have discussed how their peers trade and again it appears that they do not know anyone that has gone full time with the kinds of methods discussed on line and in the trading literature such as books by Alexander Elder.

With each one, what they did was a bit of a surprise. With the guys that are able to frequently predict reversal points way ahead of time, it actually seemed a bit 'magical'. It isn't magical at all, it's experience. It just seems magical after reading all the garbage us amateurs are fed through various forms of popular trading media.

Take it or leave it. Follow the common path or not.

Just dont be surprised if you get what everyone else gets when you do what everyone else does.

Well if your going to base all your trading on some beginners guide to the markets and TA, which is effectively what the Elder books are, then you are bound to fail......

But to then make the jump to proclaiming TA /charts / candlesticks don't work, and repeat it on a constant basis, despite the evidence of numerous posters is just ridiculous and extremely irritating....

 

[megamuel]

Interesting thread guys and well done for reaching 17 pages without resulting in constant bickering! Its nice to see you adults actually debating like adults! Unfortunately I am not qualified enough to argue either side here but I guess I'd like to believe some sort of technical analysis can work as that's what I've been learning so far - albeit not all textbook stuff. I'd like to ask Mr.Toast if he has shared any info on how he trades either here or elsewhere on the forum? I'm not asking for particular methods/strategies (I'm not that cheeky or lazy), just curious as to what sort of tools/information do you use to trade? I've heard people mention 'DOM' and 'Ladder'.....What are these and how would I go about learning more? And before anyone says anything... I know I can google the terms and find out that way... But, this is a forum I like discussing these things with like minded people who have experience in such fields! Oh and may I apologise in advance if this post is incoherent. I am rather drunk x

 

[DionysusToast]

Well if your going to base all your trading on some beginners guide to the markets and TA, which is effectively what the Elder books are, then you are bound to fail......

But to then make the jump to proclaiming TA /charts / candlesticks don't work, and repeat it on a constant basis, despite the evidence of numerous posters is just ridiculous and extremely irritating....

There is no evidence PS - you have claimed to have evidence but came up with some half-baked reason for not showing it. You'd teach me but....

Feel free to bring on the evidence though. Put some meat on the bone of your argument. You keep talking about "all these people" proving something but that's never been done on here.

I have not said that charts can't be used, I have said that on their own they are not enough. That without the correct frames of reference and knowledge of what moves a market in any specific trading horizon, even charts are only as useful as darts.

Furthermore, that all indicators, as well as candle patterns and combinations thereof are total nonsense that to this day remain unproven.

Bodybuilding is a multi-billion dollar industry. Magazines are choc full of adverts for protein powders and supplements next to pictures of huge guys. Books sell all of the latest workouts. Internet forums are FULL of little people advising each other how to grow muscle. People spend billions of dollars on powders, pills, pay web sites, mentors, books, e-books, dvd courses, magazines and yet none of these people ever get huge.

Why is this ? Simply because the big guys take copious amounts of steroids, growth hormone, insulin, diuretics and all sorts of crap. Not only that - they are gifted in that they have a particularly strong response to these drugs.Even if you took the drugs, you'd still end up a pencil neck. That doesn't sell magazines though does it ?

Now - go out and buy yourself a copy of Muscle & Fitness and see how much it talks about drugs - they aren't mentioned.

The parallels are obvious.

Just because millions of people buy into something DOES NOT MEAN IT WORKS.

Just because you are convinced TA should work doesn't mean it does. Just because you see books, web sites, ebooks teaching the same old tired crap does not mean it works. It is a simple fact that all of these things exist to part you from your money. They do not exist to teach you to trade and they do not teach you to trade.

You can drink the TA Kool Aid all you want. It won't make it work.

I say - give TA a shot - test out some of the methods yourself & see how useless they are. Just don't keep chasing TA for years - at some point you have to let it go.

 

[Goldmansucks]

I think a lot of people read too much in to TA. If you know what you are looking for then it works . People go on about the changing conditions of the market effecting your strategy.........how can this be the case if you analyse the MARKET correctly and not just the indicator.

Yes you can trade without indicators and candlesticks but why would you want to? Its difficult and you have to be constantly looking for at the numbers. I know a guy who trades what he calls the tape, but even he has some visual representation of price............guess what form...........candles..........only his candles do not take into account conventional OHLC. His candles are formed using some other data. Cannot remember what as I found it all too much.

I will try to find out what he uses.

 

[DionysusToast]

Interesting thread guys and well done for reaching 17 pages without resulting in constant bickering! Its nice to see you adults actually debating like adults! Unfortunately I am not qualified enough to argue either side here but I guess I'd like to believe some sort of technical analysis can work as that's what I've been learning so far - albeit not all textbook stuff. I'd like to ask Mr.Toast if he has shared any info on how he trades either here or elsewhere on the forum? I'm not asking for particular methods/strategies (I'm not that cheeky or lazy), just curious as to what sort of tools/information do you use to trade? I've heard people mention 'DOM' and 'Ladder'.....What are these and how would I go about learning more? And before anyone says anything... I know I can google the terms and find out that way... But, this is a forum I like discussing these things with like minded people who have experience in such fields! Oh and may I apologise in advance if this post is incoherent. I am rather drunk x

For short term trading, the easiest way to explain it is this:

If you wanted to go long 20,000 ES contracts would you:
a) Just stick in a market buy order and watch the prices slip 10 levels ?
b) stick in a limit buy order for 20,000 and watch everyone else jump in front of you ?
c) Make the market look weak so that people start sending in market sell orders that you take the other side of ?

If you answered "C", you would be correct.

Now - who are the people that would easily be convinced to sell when you are buying
a) Other professional traders
b) Amateur traders trading on TA
c) People that read DOM/T&S incorrectly

If you answered "B" and "C" you would be correct. The big guys know how the little guys trade & they exploit that. Fortunately, there is a steady flow of new little guys coming into the markets (because of the aforementioned indudtry selling crap trading methods) so there are always suckers around.

The DOM and Level 2 are basically books of unfilled limit orders. The tape is the list of actual trades. The tape will show printing off at the "Bid" (best buy limit) when someone enters a market sell order. A limit order is a fairly passive order, you wait for price to come to you. A market order is more aggressive - you want to jump in front of the passive orders and make a trade.

This DOM/T&S helps you discern actual buying and selling pressure at any particular time. You may not want to watch it all of the time, rather you will watch how a market behaces and then be ready to watch it at key areas/times.

In my humble :whistling opinion, the equivalent of this in longer term trading is news, derivative trades and the overall 'story' of your stock/future.

You have to avoid any simplistic interpretations of the pictures painted though. Remember - if someone is short a few hundred million, they'll be on CNBC telling you how **** things are at the point in time they want to get out. The news comes out, suckers go short as the pro's unwind their shorts.

There's a lot of short positions on education stocks right now and they have had a bloody good run dow. Go look at APOL/COCO or one of their peers - look at what Eismann is doing in the news. Look at the amount of law companies claiming they will sue on behalf of shareholders. Look how little impact any of this is now having on the prices. Watch this for the next few months and draw your own conclusions about how much charts would have helped you.

Of course, you could also believe "It's all in the chart"

 

[Goldmansucks]

For short term trading, the easiest way to explain it is this:

If you wanted to go long 20,000 ES contracts would you:
a) Just stick in a market buy order and watch the prices slip 10 levels ?
b) stick in a limit buy order for 20,000 and watch everyone else jump in front of you ?
c) Make the market look weak so that people start sending in market sell orders that you take the other side of ?

If you answered "C", you would be correct.

Yes a very valid point. Just a question based upon the above. What kind of trade do you think that would be ? A quick scalp or a slightly bigger move? What time frame are you applying that to?

I ask these question because they would be relevant to the way one trades. This action will either create a quick upmove that one can profir from quickly or it will create some noise , and clarifying the signal after the market has settled down.

I am assuming that once the professional has made the market look weak, there will be a reaction from all traders that will not be clear immediatley.

 

[Prawnsandwich]

There is no evidence PS - you have claimed to have evidence but came up with some half-baked reason for not showing it. You'd teach me but....

Feel free to bring on the evidence though. Put some meat on the bone of your argument. You keep talking about "all these people" proving something but that's never been done on here.

I have not said that charts can't be used, I have said that on their own they are not enough. That without the correct frames of reference and knowledge of what moves a market in any specific trading horizon, even charts are only as useful as darts.

Furthermore, that all indicators, as well as candle patterns and combinations thereof are total nonsense that to this day remain unproven.

Bodybuilding is a multi-billion dollar industry. Magazines are choc full of adverts for protein powders and supplements next to pictures of huge guys. Books sell all of the latest workouts. Internet forums are FULL of little people advising each other how to grow muscle. People spend billions of dollars on powders, pills, pay web sites, mentors, books, e-books, dvd courses, magazines and yet none of these people ever get huge.

Why is this ? Simply because the big guys take copious amounts of steroids, growth hormone, insulin, diuretics and all sorts of crap. Not only that - they are gifted in that they have a particularly strong response to these drugs.Even if you took the drugs, you'd still end up a pencil neck. That doesn't sell magazines though does it ?

Now - go out and buy yourself a copy of Muscle & Fitness and see how much it talks about drugs - they aren't mentioned.

The parallels are obvious.

Just because millions of people buy into something DOES NOT MEAN IT WORKS.

Just because you are convinced TA should work doesn't mean it does. Just because you see books, web sites, ebooks teaching the same old tired crap does not mean it works. It is a simple fact that all of these things exist to part you from your money. They do not exist to teach you to trade and they do not teach you to trade.

You can drink the TA Kool Aid all you want. It won't make it work.

I say - give TA a shot - test out some of the methods yourself & see how useless they are. Just don't keep chasing TA for years - at some point you have to let it go.

You are verging on delusional - I have said before that I am lucky enough to be a consistently profitable trader, using TA. Others have said the same.

Now I (we) are not going to present you with statements, teach you how to trade or engage in some blind, biased and meaningless backtest.....

BSD has covered this ground in considerable detail on previous "Does TA work" type threads, and provided you with copious evidence of TA working exceptionally well - anyone can do a search .....

so I'm not going to reinvent the wheel again as I just could'nt be arsed with with this sh1t, whereas you seem to have the capacity to go on and on and on, just completely ignoring any evidence put in front of you...

No doubt you will revert again to attempt to get the last word in with another long winded thread, maybe without the bodybuilding and steroids (perhaps this is some subconscious element of your psyche coming into play)

Even your mentor has clearly set out a simple effective TA trading strategy on this very forum.....but no, DT cant accept it ...IT JUST DONT WORK (and you did say charts don't work)