What is NOT Price Action ?

[Hlm]

Nice post.

Originally Posted by Kiwi However, if one wants to claim pure price action trading, then they should only have price (bars or whatever) and volume on their charts. No channels. No trendlines. Nothing else --- because a trendline is no less a derivative of price than a ma or keltner.

Couldn't you take it as far as one [pure PA trader] having to only use a single tick chart. Anything more is wrapping price into a nice little summarization just like channels, trendlines, etc. Also, going back to the thread title of "what is NOT Price Action"...volume.

[zdo]

Tams,
Good question
The topic question is basically “how much latitude is in the collective’s definition of PA?” and the answer is “as much as you can tolerate or get away with in your current PA conversation”. You’ll be in PA conversations where the illustrations are filled with indicators. You’ll be in conversations where the other disavows anything but a certain type of PA but a little bit later you start perceiving he’s running uncharted fuzzy wet ware indicators outside his own awareness…

No one gets away from patterns
On one extreme, they may be patterns restricted to just a chart - a line chart, a bar chart, a candle chart, a renko chart, a profile chart…
In the other extreme, they may be indicators only.
Most traders use some combination.
Also, the trader may be using a lot of past action in the scans for pattern or virtually none. Examples: an Elliott waver needs ~100 bars to differentiate pattern, some tape readers need sub 12 seconds of data
All traders are using their own (hopefully unique) admixture of all of the above…

other related, possibly important, questions …
what patterns am I most attracted to?
what patterns am I naturally good at seeing?
what is the best (visual in most cases) representation of market auctions to facilitate me to stay in flow.
what patterns would I like to get better at seeing?
what blocks me from seeing certain patterns real time that I would like to trade?

[DbPhoenix]

As we pointed out repeatedly in the links I provided earlier, it's all price action since everything is derived from price movement. But then one must decide just how many filters he wants and how far from the source -- or the "territory" -- he wants to be. I've found greater success by focusing on the continuous tick by tick movement of price, but others may prefer to be further separated from that, either by using summary bars or candles 5m, 15m, 244 tick, CVB, etc) or by using indicators or by focusing on patterns or by some other means.

So is someone who's trading 15m candles with an 8p EMA trading price action? Yes. Is he seeing the same thing as one who is following the continuous tick by tick movement of price? No. Most of the latter is in fact invisible to him.

Trader's choice.

[BlowFish]

Originally Posted by Hlm Nice post. Couldn't you take it as far as one [pure PA trader] having to only use a single tick chart. Anything more is wrapping price into a nice little summarization just like channels, trendlines, etc. Also, going back to the thread title of "what is NOT Price Action"...volume.

I was thinking the same thing though just looking at time and sales (or the tape if you like). By plotting bars you are embarking on a data sampling exercise.

Practically, anyone who uses 'price' to make trading decisions is a PA trader, so what if they like to have a 20ema VWAP floor pivot or PoC to remind them which way up they are.

Good thread title it is often clear what is not PA trading (like just trading from the CCI ) more debatable what is.

[VolumeJedi]

Originally Posted by BlowFish ...Practically, anyone who uses 'price' to make trading decisions is a PA trader, so what if they like to have a 20ema VWAP floor pivot or PoC to remind them which way up they are...

I would have to disagree with this BlowFish.

Originally Posted by thalestrader ...I think one can distinguish between someone who uses indicators to help support a price action based trading approach, and one who uses indicators as a trading approach...

Any definition of price action trading would take into account the use of price and possibly volume in the 1st order. In other words price and volume in and of themselves. MA's, RSIs and other indicators are 2nd order as they are derivatives of price.

Take a look at the below chart. Can anyone using this chart truly be considered a price action trader?

This method uses Momentum and momentum is a 2nd order derivate of price (and time). Even the pivot points (green lines) are defined by changes in momentum and not price itself. Although they do a good job of visually accentuating these price points, they are a function of price and not price itself. Thus can one accurately say they are based on Price Action?

True price action traders don't have 15 different indicators on their charts. Price action trading is about getting closer to price, not further way from it. Indicators move you further away.

[RichardTodd]

Originally Posted by VolumeJedi Take a look at the below chart. Can anyone using this chart truly be considered a price action trader?

Discussing what kind of trader someone is by looking at their chart convinces me that we are way too focused on surface details. This is like figuring out what kind of cook someone is by looking in their pantry. At best you can paint broad strokes, you know?

I think this (imho) misplaced indicators-or-not focus hurts newbies, who often come away from these religious discussions thinking that cleaning up their charts will somehow make them profitable. Every time I see them chanting the "indicators are not the answer" mantra, I sigh, because I know that a bare chart isn't the answer, either.

Too often, we're diverting attention from the central issue of being a winning trader. That is, a trader needs an understanding about the way the market works which gives him an edge, and he needs to find opportunities to exploit that understanding. Whether he spots his opportunities with raw data or derived data isn't very important compared to the concepts behind the trade.

I recognize that it's good to warn newbies about the pitfalls of indicators, because they are so attracted to silly recipes like "set it on 14 and buy when the squiggly line crosses -50." But, I've also seen folks proudly remove their indicators, only to proudly drain their account spotting faux "support" and "resistance" all over the place. What's missing in both cases is a working understanding of what the market is trying to tell them. Imagine how much more helpful it would be to keep the focus on that!

Just my two cents.

[TIKITRADER]

Here is a 5 minute ES chart consolidated from June 16.
There are containers for price, and some horizontal zones marked from previous price congestion areas and end points.
Would this chart be considered price action, or do the addition of trendlines change that ?

[Kiwi]

Tiki,

Its easily overdone. If you make a trade because of what price is doing it is price action.

That's different from making a trade because (say) the RSI turns up.

Horizontal and diagonal forms of support and resistance indication (trendlines, channels, horizontal zones, mas, vwmas, vol@price, and market profile) help you to figure out where people might perceive value. Perceived value makes price action that might not be relevant in the wide open space between areas of perceived value worth trading.

Eg. at the trendline you get an inside bar and then a bullish engulfing bar ... so the probability of the entry resulting in an up move rises. The pa also defines when you are wrong (stop under the beob) nicely so you can define risk reward as well as knowing probability is higher.

So, if you trade because price (ticks, bars, candles, etc etc) is doing x rather than derivative (ma xover, rsi, stoch turn up) is doing y then you trade price action. The fuzzy argument tends to be around the question of this S&R vs that S&R (horizontal only is most pure )