Can price structure and action lead the way
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The document discusses the efficacy of using price action and chart structure in trading over relying solely on indicators. It emphasizes the importance of understanding market rhythms and making discretionary trading decisions without blind dependence on technical indicators. While it acknowledges some usefulness of indicators, the author advocates developing skills to interpret chart patterns and make informed trading choices based on price movements.
Can price structure and action lead the way
- 1. Can Price Structure And Action Lead The Way? http://www.netpicks.com/no-trading-indicators/
- 2. With all the trading indicators that are available and their ease of use (not usually successfully though), it is easy to forget that simple still works. Let's not confuse simple with being easy though but in this instance I want to use simple in terms of price action and structure.
- 3. I also don't want to take away from the simple nature of trading indicators but understand that price is needed to make them work. So why not just go to the source?
- 4. It's not that I am against all trading indicators because I do find usefulness in a few of them just not to dictate trades.
- 5. Interesting enough, whenever you look at a trading forum and someone posts a chart with a moving average for example, the common question is "what is the setting?" Does it really matter if the setting is 20 or 30 periods?Over the course of many trades the answer is, "probably not".
- 6. While the Netpicks trading systems utilize indicators, you DO NOT trade them blindly. Discretion is taught during your training which enables you to expertly pick the higher probability trading plays that are shown directly on the trading chart.
- 7. But this is not about trading indicators. This is about structure, price, and simply trading basics that are used with skill.
- 8. The following trading charts are from a recent trading session and as you can see, no indicators were used for the trading choices.
- 9. I am going to break down what I find to be the important details on these charts. Some may agree, some may disagree but it works for me and to me...that is all that matters.
- 10. The pattern of the uptrend is broken for a swing once a LH is put in place. The uptrend line actually originates further off to the left of the chart but you can see the HL after the LH comes into the line although a zone around the line is close enough.
- 12. A high is put in and then price pulls back again in the location of the uptrend line. The line does not actually physically hold price but trend lines are more or less measures about the current "state" and volatility of the market. There is a rhythm to price movements.
- 13. A LH is put in again just before the open. The horizontal line originates from the left where price was supporting in that zone and eventually broke through. Price is now up into the same line and appears to be showing that sellers are willing to resist at this price.
- 15. NOTE: There is much subjectivity around support/resistance lines so I just use areas that are obvious. If I have to search for an area, I am not too interested in it.
- 16. At the open, price slams through the trendline, has a stall around the HL just to the left and then falls to a more prominent pivot area.
- 18. NOTE: Pivot area is not to be confused with pivot points. Pivot areas are simply areas where price turned. There are major and minor pivot areas.
- 19. Whenever I see a strong move in one direction especially after a break of a technical such as trendlines, I get very interested.
- 20. This next trading chart shows the strong move down and then something interesting happens at the pivot marked "A".
- 22. Price breaches the low and is quickly bought up (failure test of the support zone) and given that often times a trend line broken to any side gets
- 23. a revisit of price (B), I bought into the move once price confirmed the direction through a break of the high of the failure test candle. NOTE: The trade actually gets stopped out for scratch but is bought back again and target is reached.
- 24. EXPECTED MOVE
- 25. Now price has done what I expected it to do after it showed a failure to break the pivot. It is sitting up inside the trend line and the high of the candle is running into a trend line off the highs off the previous two candles marked "A". bigger trend line.
- 27. Not shown on the chart but you can also form a channel using the downward trend line and you would see price break through the low and then retest just like we see on the
- 28. Price is also being held up at a price zone that is providing resistance to the bulls. You can see in the inset box that as soon as bears stepped in, a short trading position was taken.
- 29. These are simple concepts however they can be difficult to implement due to subjectivity that virtually all of us have.
- 30. Trading indicators are popular for many people because if you just follow the indicator, your emotions, judgments, and some biases can be removed. (although blindly following an indicator is a recipe for disaster).
- 31. But let's see if we can make some of what I covered objective.
- 32. - Draw trend lines from the last two/three lows or highs - Use pivots only when highs/lows are taken out to confirm pivot - Failure tests must conclude with testing candle closing > 50% up/down the body
- 33. I'm sure there are a few more variables that we can put rules around but this is a good starting point.
- 34. As I mentioned earlier, I don't dismiss all trading indicators as there are some that are useful. Yes, even the moving average set at the basic setting of 20 can be used to help you frame the market.
- 35. This entire piece was to show that indicators are not a necessity and you can learn to skillfully trade using just what you see on the chart. It's a skill that can be learned but give yourself time to become proficient.
- 36. Trading can be lucrative and it is naive to think that a PDF and a week of studying will have you raking in the money the following week. Be a professional in your trading and on the journey towards success.