Is Price Action a system or not?

I first started by attending a few webinars and read articles. I briefly tried demo trading but as my results were just 50:50 I figured I needed to learn more -> More webinars, more articles.
I become most interested in Price Action trading and my conclusion was that Price Action is not really a system but instead of rules you try to really understand the reasons for recent Price Action and then use this understanding to make informed and intelligent decisions.
So no system but brain. Did I get a false idea?

I got a sandbox trading simulator (Forex Tester) and tried what I thought i had learned about Price Action. Again I had about 55:45 success. That is not really good, is it?
I tried Price Action with only a 20 EMA on AUDUSD in the 4 hour timeframe. I did not look at other timeframes. I must admit I made not a great amount of trades. Maybe 20-30.
Eventually I would want to write down trading rules before I finally make a statistic to calculate risk of ruin and make decisions about position sizing/money management based on that statistic, but for the moment I thought just trying the information I had assimilated should make the simulated trading account grow steadily... It didn`t, really.

I am generally easily discouraged - I am looking into this psychological issue and I am not frustrated as I would have been 2 years ago before I got material on this. But I am unsure if I am spending my time well if I simply continue. The equity curve is flat - so that`s an indicator that what I have been doing in the sim doesn`t work.

I have read some posts in the trading systems section (those with many reads and replies) but did not yet find one. I was not able to read about many systems all 50+ pages of each of those threads... I cannot spend 1000 hours reading about systems before I even start testing them. I can neither try out all systems. That would kill my motivation and life time is limited. So I try to understand the systems and mostly try to find if it`s plausible for me before I decide. Mostly I read a lot about a particular system before finding it most likely doesn`t fit me. I am willing to spend the time necessary but so far just hours of reading and no results.

One thing that is very particular for me: I need precise step-by-step instructions to understand these things. I get confused easily when people skip mentioning things that they find obvious.

I don`t expect to find something that produces less than at least 25% losing trades and I don`t expect to have meaningful statistics on a system or be experienced enought to go live before trading at least 6 months worth of price data and 50-100 trades for any system and having spent many more hours training.
But I think I did not yet grasp what I have to know before trading (in the simulator) so that I learn and have some modest first success to keep me motivated.

Things that caugt my attention/interest besides Price Action are Pivot Point based trading and Ichimoku.

Any suggestions welcome.

Here is a system called Stairstep Breakouts. It uses no lagging indicators of any kind, and all trades are based on price action alone. Members are having 70% and 80% win rates:

http://www.forexfactory.com/showthread.php?t=302007

Winning rate is no so important as your money and trade management. If your winners gain 2 to 3 time your risk, you may end up with great return

Ex on 55 / 45 winner with 2 time gain on your risk

55 * 2 = 110
45 * -1 = -45
Return = 65 time you risk

Let your profits run and keep your losses short

Martin

Yes Martin. I agree. Results where mostly 50:50 on profits/losses aswell. Actually I had more losing trades and greater wins than losses if I recall correctly.
Of course for properly estimating the value of a trading method exact numbers have to be looked at and not estimations. In my first-steps-trial however this did not yet make a lot of sense.

Thank you forexhard. I will take a look that this.

To increase your understanding of the market behavior, I would suggest to read post by user "HiddenGap" and read articles about "WRB" :Wide Range Body or Wide Range Bar

Market is always in reaction to an event( News, Price target, Political event, Terrorism attack, Interest rates etc.). Study WRB concept and look to take new entry accordingly to it.

PM me if you want more info. (I'm not here to promote any site)

Martin

Thank you Martin for that tip. I will look into that aswell.

Any opinions on wether Price Action trading is no-system-trading by definition?

I would not call price action a system. To me.....Price action is nothing more than how price moves one candle or a series of candles. Then we develop a personal trading style or system based on our understanding of PA. So what works for any trader based on their understanding may not work for you.

My trading style is based on PA and my personality or my psychological makeup.

For what its worth Rufus

Hi Bill Buck,

First I would say to you is trend trading a system? or stochastic trading a system? or trading fundi's a system? - simple answer no.

But put a set of instructions around those things and they become a system same with PA trading.

System derived or related to systematic and therefore if you follow a set of rules to trade then it is a system whatever you are using.

Now, if somebody just looks at the chart and says BUY is that PA trading? and if so is that a system? IMO that is gut-shot gambling and neither PA or a system.

Thank you Rufus.
I think I see a bit more clearly now. I would say now that my misunderstanding was a bit different than I tried to explain in my initial posting. I would put it this way now:
I got the idea that with looking at Price Action instead of looking at for instance at divergence of MACD versus direction of price, you would...

1. ...not need rules written down because you can get a deeper understanding of the relationship of forces (buyers vs. sellers) and therefore make decisions based on reasononing.

2. ...not be able to define simple rules based on Price Action because it is too complex for rules to factor in everything plus you would need too many rules for every possible situation.

Maybe both is incorrect.


I also see more clearly now that Price Action is a source of information –just like moving averages, trand lines et cetera.
And making decisions is how this information is processed –which is the trading strategy or trading system.


Again, any thoughts of you appreciated.

Hi Bill

I think the problem that most people run into with trading strictly PA is having no rules or standards. They see a weird candle start to form and jump on it, thinking it has hit a zone then jump on the bandwagon without any thought for why the candle is forming.

Some PA purists will look at indicators as being "evil". But the way I see it they can be used to help confirm something you are seeing. It is my opinion that what it comes down to is a balance of what works for each individual trader. My repertoire is 2 moving averages,(Depends on what time frame I am considering), Fibonacci, and in ranging conditions I will consider a stochastic. But all of this is in subjection to supply and demand. I guess in that regard, this would be my trading system.

Part of the fun in all this is designing what will work for you then improving it as you gain experience.

So have fun with it.

Rufus

@op,

Price action is exactly as the name suggests. The price's action. You can't exactly call it a system. PA is the way price behaves. It tells you certain things about the market participants at a given time.

But you should build a system around it.

For example, certain price patterns usually indicate that the market will move towards a certain direction. So you build a system around that. EG: When I see an ascending triangle near a support/resistance on the 1hour time frame, I will enter a long trade with a stop loss of x pips and a profit target of 2x pips.

So price action is not a system. Similar to how stochastic is not a system. A system is a set of rules based on things like stochastics and price action and moving averages etc.