It's kind of curious...the war between price and indicators | Forex Factory

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It's kind of curious...the war between price and indicators

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  • #1
  • First Post: Edited Nov 24, 2010 4:56pm Nov 23, 2010 11:47am | Edited Nov 24, 2010 4:56pm
There's just something about the war between price and indicators that make me chuckle xD

But in all seriousness I do have a question that I'm sure the better minds of FF can figure out better than I.

It's been said that indicators are useless because they are based on price and price is the only true indicator you need. Don't get me wrong, this statement is 100% true.

But it's also agrued that price is its own right is lagging. To determine a trend (or range), a certain amount of bars have to go by. We must look to the past to see where we are in the present. The same goes with S/R levels, fibs, trendlines, double tops/bottoms, heads and shoulders, triangle consolidations, etc.

If a 48 period moving average on a five minute chart gives us the an average of the 48 bars (or the four hour equivalent on five minute chart), then we can see slope. There are many people who use an EMA slope as trend direction. The catch is that they use 48 bars in order to find the trend.

Price action traders look back maybe 10 bars, maybe 48, maybe more to see where the market direction points with the assistance of trendlines, channels or even Jacko's infamous "give it to a five year old" technique (which uses the whole chart which on my screen is in the ballpark of maybe 100 bars)

Another arguement in favor of indicators is... well... "indicators are based on price". Let me explain.
Indicators are not the raw data but ARE based on it. The advantage is that they show data in a way that we would not see it without indicators.

Don't get me wrong, I don't believe in Stochs or any kind of oscillating indicator that reduces the market to basically an up and down motion. Essentially, it's a sine wave.

But trend following indicators or trend strength indicators or market volatility indicators? Why not. They're based on price the same way S/R levels, fibs, trendlines, double tops/bottoms, heads and shoulders, triangle consolidations, etc. are. Past price to be exact :]

The only way to trade price action without past price is really just trading immediate patterns like pin bars or inside/outside bars. Even then you need another bar to confirm a pin bar and inside/outside bars require another bar in the past.

But now I'm just being a nitpicky asshole

Maybe there's a way to just trade the exact present? No past price needed. CrucialPoint found that way and I'm on the search for it as well. (Anyone got insight on this? xD)

So!
Let's hear it from you, the FF community.

Indicators based on the past price, Price action trading also based on past price, or trading without past price?
  • #2
  • Nov 23, 2010 12:14pm Nov 23, 2010 12:14pm
Busted! PA hypocrites! I'm going back to indicators.
  • #3
  • Nov 23, 2010 12:21pm Nov 23, 2010 12:21pm
round numbers might work (round numbers do not depend on old prices, they are absolute).

Maybe fundamantals too (really fundamental fundamentals, those that deserve their name because they are really fundamental): Someting like "buy gold", even if traded with closed eyes might be profitable more often than 50%.
  • #4
  • Edited 12:31pm Nov 23, 2010 12:25pm | Edited 12:31pm
Quoting jmag
Busted! PA hypocrites! I'm going back to indicators.
I don't want to say this out loud because I don't want to make my posts less credible by saying this but... I still do use indicators...

I've always wanted to trade pure PA but it's this one argument running through my head! It's stopping me from moving on.

And I know a lot of people on this forum trade pure PA. I've read through through more topics beginning to end than I can count at this point. It seems like all the best traders trade pure PA andthe most successful ones trade pure PA. The ones with the most vouches usually trade pure PA xD

I've heard of successful traders that use indicators... just not a whole lot from this community xD
Seems around here every success story evolved from indicators to PA xD

And I want this more than anything. But I need to know why PA is better. I need to have my argument refuted. I need to be WRONG!

That's why CrucialPoint's idea intrigues me. It's because it's beyond price past - the thing indicators and most price action trading is all about.

So someone. Please. Make me wrong xD

Quoting 7bit
round numbers might work (round numbers do not depend on old prices, they are absolute).

Maybe fundamantals too (really fundamental fundamentals, those that deserve their name because they are really fundamental): Someting like "buy gold", even if traded with closed eyes might be profitable more often than 50%.
Oh fundies... coincidentally I'm in my AP Economics class as I type this xD
Gotta love schools that allow laptops.

That is a good point, 7bit. I'm having a hard time letting go of indicators as is so letting for of technical analysis all together will be harder than dropping cigarettes cold turkey
(on that note, happy early Thanksgiving to everyone in the US xD)

Round numbers does sound like a good idea. I do keep round numbers on my charts actually but as of late, I've been using them less and less.

Would you say Round Numbers act in a way like S/R in that the more times they are tested in the past, the better they are for entry?

Thank you for your insight!
  • #5
  • Nov 23, 2010 12:35pm Nov 23, 2010 12:35pm
Quoting CrucialPoint
The basic foundation of my system is non-reliant on price history...(followed by)... I don't trade naked I do use 3 indicators. It might sound hypocritical because indicators are history based, but I use them as a guide, I can trade without them. Hey, why not use power windows when it's available.
Let me begin with I have no desire to start a discussion/debate/war/argument with CrucialPoint.

I think his thread is phenomenal and a great contribution. Everyone should read it, and take from it what they can use in their own systems/methods.

I do think his statement above is contradictory. If the foundation of his system is non-reliant on price history... then indicators would NOT be the equivalent of "power windows".

I think profitable traders who use discretion (more than pure mechanical methods) have trouble communicating ALL of the elements of their profitable thought processes. There is too much happening, on many different levels. (variables related to yourself, your system, market conditions, market volatility, and the potential for random distributions within a framework that has an edge)

Aside from the above statement, CrucialPoint also said this-
Quoting CrucialPoint
I have no doubt...come to the conclusion that a simple system which consists of two Moving Averages (nothing more) is highly profitable to a Professional trader...
What is he trying to say?

You can keep it simple. You don't have to find the "secret formula" or the absolute truth of PA vs. indicators vs. astrology...
Though you may not trade the same way CrucialPoint does, (his journey was his own), you can still be as successful.

Just my 2 cents.
  • #6
  • Nov 23, 2010 12:44pm Nov 23, 2010 12:44pm
First of all, don't try to be like others. I strongly believe that PA is hyped here on FF, and that indicators are down-talked in many cases. Success in trading comes from how you use signals, rather than what signals you use.

7bit names fundamentals and round numbers. I would like to add tape reading as a way of trading in the current.
The nail that sticks out gets hammered back in
  • #7
  • Nov 23, 2010 12:46pm Nov 23, 2010 12:46pm
Quoting Intu
Let me begin with I have no desire to start a discussion/debate/war/argument with CrucialPoint.

I think his thread is phenomenal and a great contribution. Everyone should read it, and take from it what they can use in their own systems/methods.

I do think his statement above is contradictory. If the foundation of his system is non-reliant on price history... then indicators would NOT be the equivalent of "power windows".

I think profitable traders who use discretion (more than pure mechanical methods)...
Yes I've seen some things I saw as contradictory in his journal as well but what I'm mostly getting at is his no-past-price idea. I never understood why he would need anything else if he could trade completely without past price but I'm sure there's a reason. I feel as though I'm biased because I still do use indicators.
What can I say? I heart them.
But from his other posts, I feel as though he uses them in a way I don't. I use them to see the market in another light (unlike other who use them as a crutch).

But yes I agree with your spotting of his contradiction.

The second part of your post has pushed me in the right direction toward price, no price, or indicators. So thank you very much, Intu

Quoting Noloqy
First of all, don't try to be like others. I strongly believe that PA is hyped here on FF, and that indicators are down-talked in many cases. Success in trading comes from how you use signals, rather than what signals you use.

7bit names fundamentals and round numbers. I would like to add tape reading as a way of trading in the current.
I'm not necessarily trying to emulate anyone as I am trying to... well y'know it's helpful to have people you see as role models.
Like if I wanted to join the NBA, I would watch Kobe Bryant play and watch as much as I can of his footage and figure out what he does that makes him successful. I would do well to do the same for Michael Jordan and many basketball legends. Maybe that's just another crutch of mine xD

But hearing that PA is hyped on FF is something I like to hear
Seeing everyone with PA and doing well can sometimes make a guy feel like he's doing something wrong, y'know?

By tape reading, do you mean ticker tape and reading and watching the tick charts?

Thanks, Noloqy that's just another step forward!
  • #8
  • Nov 23, 2010 1:32pm Nov 23, 2010 1:32pm
To clarify, what are considered PA tools? Trendlines, S/R lines? Time lines? It doesn't seem like there is really a difference except who draws them. They are all past based indicators except for time trades like market break outs. What about MA's is used as S/R?
  • #9
  • Edited 2:33pm Nov 23, 2010 2:16pm | Edited 2:33pm
Contradictory.

I read so much about people being confused about my journal.
I see so much argument that tells me they don't read properly... or somehow people have selective hearing and only absorb what they want to believe according to their bias.

I have no time to argue useless arguments, so please let me have all your undivided attention for a moment

Let me make it clear:
Point #1:
My first post:
"Here are **some** of my journal entries over the years (not in any particular order). Each entry are lessons I had to learn and develop personally to become a Professional trader. These are the disciplines I personally uphold. I wish they may be of use and may help you with your own journey.
***Forget asking for my system/strategy, I will only post what I want to share.***"

I don't recall promising an ABCD guide on how to step by step trading.
Seriously... I thought I made it clear from the beginning.

Point #2:
I wanted to share **some** information that may help people with their journey. Not spoon feed them a blueprint of a system or method or strategy. Please quote me if I stated about handing out blueprints.

Point #3:
Contradictions...
I posted about converting MTF into a single TF by using MA and lines. I was teaching people how. There were never a contradiction whether I use MA or lines. I stated "I prefer" lines, but these are in a context of teaching, and not the exact way how I personally trade.

I open a minute chart without any lines or MA's and I can read the chart in its MTF dimension from experience. My chart has 3 indicators in it, which paints me a whole story about the market. My indicators are not signals, they are "a language that defines the structure of the market." I stated this in bold-red in my post.

Contradictions...
A new way of trading without price history... It's been posted "Twice", and asked people to prove me wrong about the observation. "Twice" in bold, talking marks and highlighted. OhMyGoodness

Contradictions...
Indicators: they tell me a lot more than buy and sell. I don't use indicators how the 95% would use them. I didn't explain how I use them. But how I posted about boundaries, converting MTF, wrong combination of indicators, and grounding the reticular perception, should gave a hint that indicators are used far greater than buy and sell signals.

Contradictions...
Crossing two moving averages... I never said/posted anything about MA crosses. I said that "2 MA are highly profitable to a Professional trader". Please Quote me. This also does not imply how I trade.

================
In all sincere...
If one is not ready, one will not see, even if it is right in front of them. So please, forgive me if I don't respond to queries and explain myself. When one is not ready, one will not receive. Selective hearing, bias, fate, call it what you may, if it's not your time... it's not your time. I've left enough to make a positive difference to one's trading.

Peace
  • #10
  • Nov 23, 2010 2:44pm Nov 23, 2010 2:44pm
Quoting CrucialPoint
A new way of trading without price history... It's been posted "Twice", and asked people to prove me wrong about the observation. "Twice" in bold, talking marks and highlighted. OhMyGoodness
Peace

Okay, I'll spoon feed this one, but you guys will have to do the work yourself:

http://www.forexfactory.com/showpost.php?p=3394110&postcount=11

http://www.forexfactory.com/showpost...&postcount=109
  • #11
  • Nov 23, 2010 3:18pm Nov 23, 2010 3:18pm
Quoting jmag
To clarify, what are considered PA tools? Trendlines, S/R lines? Time lines? It doesn't seem like there is really a difference except who draws them. They are all past based indicators except for time trades like market break outs. What about MA's is used as S/R?
I guess I would say anything and everything that pure price action users use. So everything I listed in the first post xD
And other tihngs like pitchforks and Gann lines and y'know how the list goes.
Don't market breakouts also use the high and low of a session or period as the signal points for breakouts?
At least by my understanding of breakouts xD
I believe that is also based on the past.
MAs are indicators based on past price.

But what I do like about indicators is that even though PA trading (lines and the such) is based on the past, indicators are too and thus are more or less on the same level (indicator depending I suppose). If they are equal, wouldn't you say indicators have the advantage of being mechanical as opposed to discretionary?

Just some things to think about

Quoting CrucialPoint
Contradictory.

I read so much about people being confused about my journal.
I see so much argument that tells me they don't read properly... or somehow people have selective hearing and only absorb what they want to believe according to their bias.

I have no time to argue useless arguments, so please let me have all your undivided attention for a moment

Let me make it clear:
Point #1:
My first post:
[i][b]"Here are **some** of my journal entries over the...
The great Crucial posting in a thread I started.
Excuse me because I'm a little starstruck

I did not mean to be picking apart your posts. I do not recall stating your method or taking a whack at it. I'm aware that your journal posts were non-linear but if I'm not mistaken, I believe non-past-price trading was indeed the last thing you came up with.

It's possibly one of the most interesting things I've read on FF.

Maybe contradictory was not the right word. But I was indeed confused so thank you for clearing that up :]

I believe I stated earlier that you do not use indicators like everyone else and I try to do the same (still a ways to go).

I've read your journal more times than anything on FF. That much is for certain.

Although you cannot divulge everything, I thank you for the lessons you could.

Quoting CrucialPoint
Okay, I'll spoon feed this one, but you guys will have to do the work yourself:

http://www.forexfactory.com/showpost.php?p=3394110&postcount=11

http://www.forexfactory.com/showpost...&postcount=109
Although I've read this before many times, at least now I have something to focus on and that will make a huge difference.

Thank you again, CrucialPoint

Quoting Intu
I forgot to mention that the one thing I like so much
about CrucialPoint is that he is so humble.
Hey now I don't want any trouble on this thread if it's not too much to ask xD

After reading a lot of threads you kinda can tell how most threads go.

Systems: New system, people test it, usually profitable, people add their own indicators, system is not profitable, people build an EA along the line, even less profitable, end of thread.

Discussions: Idea, quality input, anger, bickering, no input, no thread.

I'm hoping this thread doesn't just end in the bowels of the Recycle Bin or Under Evaluation or something. I want this to be helpful to everyone and not just me. Maybe other people on FF are having my dilemna as well.

But everyone's input so far has been great so keep it up, everyone!
  • #12
  • Nov 23, 2010 5:12pm Nov 23, 2010 5:12pm
Quoting vx13
Would you say Round Numbers act in a way like S/R in that the more times they are tested in the past, the better they are for entry?
There is no past! You made the premise that we do not want to look at the past, so all we have is the now and the price and the constant behaviors or properties of the instrument in general or at certain prices. Not more.

50000 minutes on EURUSD:

Attached Image (click to enlarge)
Click to Enlarge Name: 2010-11-23-235309_1023x729_scrot.png Size: 107 KB

Attached Image (click to enlarge)
Click to Enlarge Name: 2010-11-23-235206_1023x728_scrot.png Size: 118 KB


It seems EURUSD does not like to close near the 00 and the 50 and a strategy would be to trade away from these prices. The blue chart is the direction where the next M1 close will be after a candle has closed at this price. There seem to be certain areas where it seems a good idea to scalp only long or only short.
  • #13
  • Nov 23, 2010 5:39pm Nov 23, 2010 5:39pm
Your assuming ALL Price Action traders follow past bars for future outcomes. Sure, there are Price Only traders who do focus on past bar formation to "predict" future outcomes.

Theres also Price Only traders who look for possible buying/selling pressure level. This would be my strategy. I can care less what happened 1-100 bars in the past. What I focus on is, what is price currently doing now to reach a future Support or Resistance level.

Support levels = "Buyers"
Resistance levels = "Sellers"

As a price action trader, I know to look for Long positions when price bounces off Support. I'll hold that position until price reaches a Resistance level (Sellers). I only look at past price ONLY for previous levels of support and resistance as those levels usually holds strong. Theres no 'lag' in my style of trading. Its basically finding where buyers and sellers are in the market.
  • #14
  • Edited 6:52pm Nov 23, 2010 6:35pm | Edited 6:52pm
Quoting vx13
But what I do like about indicators is that even though PA trading (lines and the such) is based on the past, indicators are too and thus are more or less on the same level (indicator depending I suppose). If they are equal, wouldn't you say indicators have the advantage of being mechanical as opposed to discretionary?

Just some things to think about
It makes more sense that people switch to PA
when a) it's simpler (one line, some pattern-reading and you're done)
and/or b) it's more exact (no averages!).
It's only a tradeoff that PA is more discretionary.

The third choice: An order about to be filled, maybe.
  • #15
  • Nov 23, 2010 6:54pm Nov 23, 2010 6:54pm
Quoting 7bit
There is no past! You made the premise that we do not want to look at the past, so all we have is the now and the price and the constant behaviors or properties of the instrument in general or at certain prices. Not more.

50000 minutes on EURUSD:

Attachment
Attachment

It seems EURUSD does not like to close near the 00 and the 50 and a strategy would be to trade away from these prices. The blue chart is the direction where the next M1 close will be after a candle has closed at this price. There seem...
Nice graphs. This is the kind of stuff that HFT people do.

This is a perfect example of "no free lunch". M1 doesn't close at 50, but you can't profit from this information since it will go either way with equal probability as shown in your second graph. I bet that option straddles around 50/100 are also pricing this information in.

The places where you say you can scalp only long or short I believe are just random occurrences. You could do a 10-fold cross-validation for example by splitting your data into 10 windows and doing these statistics over each portion. The hole at 50 will probably remain in each graph, but the spikes in the direction plot will move randomly around.
  • #16
  • Nov 23, 2010 8:21pm Nov 23, 2010 8:21pm
Quoting vx13
Hey now I don't want any trouble on this thread if it's not too much to ask xD
No. I don't start trouble. That individual has a certain attitude. Instead of asking politely to explain myself, he just goes around frustrated and blab things he himself doesn't understand.

I asked him to start another thread so I can discuss, but then he goes back to my thread and disrupts it more. That's why he's very frustrated because I don't answer him... I don't have time for those type of personalities.

I just had to reply for those people who got confused and was humble enough to question them. They deserve a response.

So please continue on with this thread...
  • #17
  • Nov 23, 2010 9:34pm Nov 23, 2010 9:34pm
Quoting 7bit
There is no past! You made the premise that we do not want to look at the past, so all we have is the now and the price and the constant behaviors or properties of the instrument in general or at certain prices. Not more.

50000 minutes on EURUSD:

Attachment
Attachment

It seems EURUSD does not like to close near the 00 and the 50 and a strategy would be to trade away from these prices. The blue chart is the direction where the next M1 close will be after a candle has closed at this price. There seem...
You're right, you're right. I apologize. I lost my focus for a second so thank you for putting me back on track.

Lemme just put this out there and you can take it or leave it but... WOW!

I am very impressed.

So yes price does not close near 50 or 00, you say. So price normally zooms past it is what we're seeing? Seems that price does like to close at the two other round numbers (for some it's 20 and 80 and for other it's 25 and 75). For me, I have four. They're 17, 33, 67, and 83. Oddly enough, your charts indicate that those are prime points for price to close.

So these points can be quality turning points... erhm... not turning points because that would imply past price xD
Let's say... it would indicate "decision points" or spots where the market will choose its way. That's a bit better.

Then again, many closes around certain areas may indicate consolidation...

Maybe a set of rules that go a bit like:
1. Look for moves around the other round number levels (not 00 or 50) and avoid due to possible consolidation?
2. Take notice as price reaches 00 or 50 and if it zooms past, take the trade

Obviously need improvement xD

Maybe this can be heavily expanded on? This is truly brilliant, 7bit. Truly, truly brilliant.

Thanks for this gem!

Quoting Jhig
Your assuming ALL Price Action traders follow past bars for future outcomes. Sure, there are Price Only traders who do focus on past bar formation to "predict" future outcomes.

Theres also Price Only traders who look for possible buying/selling pressure level. This would be my strategy. I can care less what happened 1-100 bars in the past. What I focus on is, what is price currently doing now to reach a future Support or Resistance level.

Support levels = "Buyers"
Resistance levels = "Sellers"

As a price action trader, I know to...
Please excuse my assumptions.

Also excuse the following. I do not mean to challenge you.

What I seek would be a clarification of the information you are giving me.

You said that "I know to look for Long positions when price bounces off Support" and you also said "I only look at past price ONLY for previous levels of support and resistance as those levels usually holds strong". Don't take this the wrong way. But y'know all that crap I said in the first post. You said you look to the past for S/R and trade off S/R. You're right in saying that you don't look back into an exact number of bars like indicators do and that very well may be a key into why PA traders seem to be successful around here.

Maybe you could clear up what you meant about future S/R?
S/R by definition requires past price but is there a different way you see S/R?

Thanks, really, Jhig and I hope this post didn't offend you.

Quoting ha-pattern
It makes more sense that people switch to PA
when a) it's simpler (one line, some pattern-reading and you're done)
and/or b) it's more exact (no averages!).
It's only a tradeoff that PA is more discretionary.

The third choice: An order about to be filled, maybe.
Seems like the pros are cons kinda balance out, huh? xD

More or less.

There's mechanized trading, alerts, and if you're not on indicators overload, a quick look to them can show you the way quickly.

PA is very pretty to look at. Very nice and clean. It's raw and yes like you said, precise and exact.

I want to either see one of these two in a certain light that makes one clearly better or a method all its own that doesn't require past. Quite the dilemma, y'see!

When you say, orders about to be filled, do you mean placing pending order to probe the market (I read of a famous trader who did just that. Terrible, terrible win/loss but the few winners he had outweighed the losers so much that he was extremely profitable) or like orderflow?

Thank you, ha-pattern for the great points

Quoting Adal
Nice graphs. This is the kind of stuff that HFT people do....
Excuse me while I look up the definition to every other word you said and lemme get back to you xD

Quoting CrucialPoint
No. I don't start trouble. That individual has a certain attitude. Instead of asking politely to explain myself, he just goes around frustrated and blab things he himself doesn't understand.

I asked him to start another thread so I can discuss, but then he goes back to my thread and disrupts it more. That's why he's very frustrated because I don't answer him... I don't have time for those type of personalities.

I just had to reply for those people who got confused and was humble enough to question them. They deserve a response. http://cdn.forexfactory.com/images/s...m/big_grin.gif...
No, no sir. He has removed his post out of the kindness of his heart and because he understands what happens. Not only that, he seems to respect the thread and the path it's on. Trying to find the answer and all.

I can vouch for Intu. I have received word from him and he removed the post because he only has good intentions.

You both have strong and informative inputs and I thank you both greatly for it all. I wasn't even expecting any replies to begin with

Thank you for you time and your willingness to share, CrucialPoint.

Hope we can keep this thread going long enough to learn something significant!
  • #18
  • Nov 23, 2010 9:54pm Nov 23, 2010 9:54pm
"I dare anyone on this entire planet to prove this observation wrong; 95% of the time, Price will close above or below its Opening price. Less than 5% of the time it will close at its opening price. This is where the pot of gold are buried."

I havent read all of CPs thread, but keeping it simple, the above seems to be the core concept. This is all you need to know!?

Can you build a strategy around this truth!?
  • #19
  • Nov 23, 2010 10:13pm Nov 23, 2010 10:13pm
Quoting vx13
No, no sir. He has removed his post out of the kindness of his heart and because he understands what happens. Not only that, he seems to respect the thread and the path it's on. Trying to find the answer and all.

I can vouch for Intu. I have received word from him and he removed the post because he only has good intentions.
No, I wasn't referring to Intu... I was talking about Four Kids. Four kids' very frustrated with me
  • #20
  • Nov 23, 2010 10:16pm Nov 23, 2010 10:16pm
Quoting PeterE
Can you build a strategy around this truth!?
And that is the right question
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