Jump to content


Next High Impact Market News Event:
Retrieving events...


Toggle shoutbox The Traders Chat Open the Shoutbox in a popup

If someone starts flaming you PM me with a screenshot of the incident and I will ban them if its legit. Do not flame them back, it makes our work as admins harder figuring out who started it. So if you flame them back, you may get banned too.
@  Rodrigo S : (25 June 2017 - 11:49 PM) it's possible make this?
@  Rodrigo S : (25 June 2017 - 11:46 PM) guys, I downloaded a indicator, but it only works on the strategy scanner, how do i make for function normally ?
@  arguetac03 : (25 June 2017 - 11:22 PM) sorry didn't mean to say that part
@  arguetac03 : (25 June 2017 - 11:21 PM) Closing price reveral
@  arguetac03 : (25 June 2017 - 11:20 PM) Are you guys making money in binary options?
@  wcpwouts : (25 June 2017 - 04:17 PM) are there any binary option brokers left who open at market opening?
@  Barnabee : (25 June 2017 - 01:47 PM) hello sir
@  thi4gon : (25 June 2017 - 12:34 PM) helllow
@  zeeshan ali : (25 June 2017 - 10:11 AM) bro?
@  kalc : (25 June 2017 - 09:48 AM) @zeeshan ali :rolleyes:
@  zeeshan ali : (25 June 2017 - 09:39 AM) ?
@  zeeshan ali : (25 June 2017 - 09:39 AM) what is best indicator for binary option^
@  kouropalatisk : (25 June 2017 - 08:42 AM) Guys, is there a broker on MT4 that has the same bitcoin as IQ option?
@  kalc : (25 June 2017 - 06:42 AM) I Am Legend
@  arguetac03 : (25 June 2017 - 01:59 AM) Who's legend
@  EricTran : (24 June 2017 - 07:07 PM) Bollinger
@  shaileshm : (24 June 2017 - 03:31 PM) that was his main strat
@  shaileshm : (24 June 2017 - 03:31 PM) @ TraderPro2012 http://www.binaryopt...egend-strategy/
@  SHOT221 : (24 June 2017 - 01:16 PM) hello barnabee
@  Barnabee : (24 June 2017 - 09:52 AM) hello ppl

Photo
- - - - -

Price action Vs Indicators

price action indicators

  • Please log in to reply
30 replies to this topic

#21 Rockweli

Rockweli

    Member

  • Members
  • PipPip
  • 470 posts
  • Locationsri lanka

Posted 27 December 2016 - 11:53 PM

Quoted from http://mechanicalfor...ifferences.html

 

"If you have traded for long enough, you have probably found yourself discussing at some point the issue between price action and technical indicators. Some traders – after a long battle with indicators – find a sense of elegance and simplicity in price action analysis while others argue that indicators provide for information that cannot be obtained from simple price action. Is there a fundamentally better way to understand the market? Is there any advantage you can get from using price action? Is using indicators a way to ensure that you only produce systems that work in hindsight? On today’s post I seek to answer these questions as well as give you some clear facts regarding both price action and technical indicators. We’ll go through the definitions for both, how they are different, how they are the same and how these characteristics might relate with actual trading and profitability.

 

 

Let us start by defining both concepts. Price action is generally defined as any interpretation of the market that arises from simple comparisons of raw market data. For example if your trading system compares today’s open with the close 10 days ago then you can say that you are currently trading a price action based system. Price action strategies do not process raw market data in any way and therefore provide the purest image of the market. Technical indicators, on the other hand, process raw market data in some way that may eliminate some information contained within the original data. For example a stochastic oscillator gives you the location of current price relative to the High/Low range for the past X periods and in the process it reduces all market information to a 0-100 range. Technical indicators go through data and return values that are an overall simplification of the underlying price action. You could view price action as a loss-less way of trading while technical indicators are a filtered way of trading.

 

From the above it could be easy to say that price action is better because it provides more information. However, the amount of information in the market that is relevant for predictions is small, as the market is incredibly noisy. For this reason technical indicators provide a level of filtering that can be very useful in deriving systems that generate signals based on the actual underlying market behavior that is interesting to us, rather than the noise that is above. Indicators become more useful as the amount of noise in price action becomes larger (as time frames go lower) while they become less useful as the amount of noise becomes less. While a price action based system may have a very hard time producing viable signals in a lower time frame, a strategy based on technical indicators may be able to derive better results by simply looking beyond a lot of the noise that makes price action trading harder.

 

The above also does not mean that technical indicators become irrelevant as the time frame becomes larger. A technical indicator can provide you with information that is difficult to see across large amounts of data. For example a technical indicator might be able to show you what percentage of the past X bars where bullish or bearish, something that is difficult to deduce from simple price-action based comparisons. This also does not mean that price action is irrelevant at low time frames as price action can often react quickly to some events that are difficult to see through indicator filtering. While an RSI filter might take some time to react to a market spike, this can be caught very rapidly with a price action based strategy that is making some quick OHLC based comparisons using data from only the past few bars.

 

From an algorithmic system creation perspective people often complain against technical indicators because they are perceived as being more prone to “curve-fitting”. People often think that their chances of developing a successful strategy with indicators are slim because the degrees of freedom inherent to the indicators themselves – the variables relevant to their signal processing – gives them the ability to adjust the system (curve fit it) to past market conditions in what is perceived to be “excessive”. However price action based systems can do exactly the same thing if they are provided with enough degrees of freedom. A trading strategy based on 10 price action based rules can actually be more prone to being “curve fitted” that a strategy that is developed using a single indicator with 3 filtering variables, simply because the price action based strategy has more degrees of freedom. The issue here is related to the data-mining bias of each one of the two approaches, provided you have determined your data-mining bias for whichever number of degrees of freedom you have there is no inherent advantage or disadvantage inherent to the type of system you’re using. The issue here is related to the degrees of freedom of your strategy and not to the type of variables being used.

 

It is also worth mentioning that I have had experience in the past with both types of trading strategies (based entirely on price action and entirely on indicators) and I haven’t found any indication that one source might be better than the other. A strategy can be developed in an entirely sound way for any of these two approaches and neither one nor the other gives the strategy an additional probability to succeed under live trading conditions. In the end both price action and indicators are sources available for the design of trading strategies and a smart trader would definitely take advantage of both to develop better trading systems. Indicators can be used as signal filters to get information that would otherwise be difficult to get, while price action can be used to provide additional confirmations, fast reacting exits, etc. Both of these sources have their uses and they can indeed be combined to arrive at a more holistic approach to trading.

 

Finally I would like to point out that it is very important to understand indicators whenever you use them. Indicators are signal filters and as such you should understand what they are filtering, what information they are giving you and how you can use this information to create or improve a trading system. Indicators can rarely be used successfully without a deep understanding about what they are calculating, how they are being calculated and what these calculations say about the underlying price action."

good explanation.i also mention this in first post. 

thanks shaileshm for post...................

seems now more cleared. ;)


"Can you smell what the Rock Weli is cooking"


#22 PaititiGold

PaititiGold

    Member

  • Validating
  • PipPip
  • 400 posts

Posted 28 December 2016 - 12:19 AM

Quoted from http://mechanicalfor...ifferences.html

 

"..........................From an algorithmic system creation perspective people often complain against technical indicators because they are perceived as being more prone to “curve-fitting”. People often think that their chances of developing a successful strategy with indicators are slim because the degrees of freedom inherent to the indicators themselves – the variables relevant to their signal processing – gives them the ability to adjust the system (curve fit it) to past market conditions in what is perceived to be “excessive”. However price action based systems can do exactly the same thing if they are provided with enough degrees of freedom. A trading strategy based on 10 price action based rules can actually be more prone to being “curve fitted” that a strategy that is developed using a single indicator with 3 filtering variables, simply because the price action based strategy has more degrees of freedom. The issue here is related to the data-mining bias of each one of the two approaches, provided you have determined your data-mining bias for whichever number of degrees of freedom you have there is no inherent advantage or disadvantage inherent to the type of system you’re using. The issue here is related to the degrees of freedom of your strategy and not to the type of variables being used.

 

It is also worth mentioning that I have had experience in the past with both types of trading strategies (based entirely on price action and entirely on indicators) and I haven’t found any indication that one source might be better than the other. A strategy can be developed in an entirely sound way for any of these two approaches and neither one nor the other gives the strategy an additional probability to succeed under live trading conditions. In the end both price action and indicators are sources available for the design of trading strategies and a smart trader would definitely take advantage of both to develop better trading systems. Indicators can be used as signal filters to get information that would otherwise be difficult to get, while price action can be used to provide additional confirmations, fast reacting exits, etc. Both of these sources have their uses and they can indeed be combined to arrive at a more holistic approach to trading........................"

Excellent article. I highlighted the key point of this article. A trader needs to achieve mastery of both the usage of indicators and price action, you don't want to be handicapped by the lack of either one as aptly described in this article.


  • Rockweli likes this

#23 traderpusa

traderpusa

    Member

  • Members
  • PipPipPip
  • 519 posts
  • LocationManila

Posted 28 December 2016 - 02:14 AM

what is true without doubt is the following : you give an rsi indi to 10 people and it will give the same result with the same settings for all 10 people. 

You ask them to draw a trendline and res sup on the same timeframe and you might up with 10 different levels.


  • PaititiGold likes this

#24 traderpusa

traderpusa

    Member

  • Members
  • PipPipPip
  • 519 posts
  • LocationManila

Posted 28 December 2016 - 02:24 AM

The article is very good.  I think a lot of threads here are using indicators the wrong way.  First of all very few people try to understand what an indicator

is actually indicating.  How many have read up on the formula inside the indi they are using ?  What about instead of using it at 30/70, 20/80, use it around

50 indicating a steady market whereby your bin trade might have more chance to make it, because lower volatility and steady trend ?


  • PaititiGold likes this

#25 dasa

dasa

    Member

  • Members
  • PipPip
  • 52 posts
  • LocationFinland

Posted 28 December 2016 - 04:53 AM

Just an example for you..

 

this is weekly chart

XK1wIDu.png now hourly..

xbwgSWf.pngplease guys.. name one indicator that can predict such reverse..


“There is no point in being confident and having a small position.”

George Soros


#26 Rockweli

Rockweli

    Member

  • Members
  • PipPip
  • 470 posts
  • Locationsri lanka

Posted 28 December 2016 - 04:56 AM

reason was i made this topic because every one looking for magical indicator that indicating arrow and enter trade. without any knowledge of that indicator what to use and how to use it with price action. after some otms waterfall or choppy market time he complain without any pa knowledge that indicator or strategy not working and leaving for another one. Then some one saying dont trust indicator just follow pa. then he leaving indicator and trying to trade with only pa (basic). But no success pa without indicators and indicators without pa. 

 

we need indicators with good knowledge of price action. without this understood no one can win with any strategy or indicator no matter how much it is good .


  • dasa likes this

"Can you smell what the Rock Weli is cooking"


#27 Rockweli

Rockweli

    Member

  • Members
  • PipPip
  • 470 posts
  • Locationsri lanka

Posted 28 December 2016 - 05:07 AM

Just an example for you..

 

this is weekly chart

XK1wIDu.png now hourly..

xbwgSWf.pngplease guys.. name one indicator that can predict such reverse..

Attached File  Support and Resistance (Barry) with alerts.mq4   7.26KB   2 downloads


"Can you smell what the Rock Weli is cooking"


#28 devhie

devhie

    Member

  • Members
  • PipPip
  • 307 posts
  • Locationindonesia

Posted 28 December 2016 - 05:21 AM

im indicator junkies :D


  • hp699flva likes this

#29 traderpusa

traderpusa

    Member

  • Members
  • PipPipPip
  • 519 posts
  • LocationManila

Posted 28 December 2016 - 05:36 AM

I can only share with you what works for me, and with proper money management has profitably results every month.

 

It is the simple concept of break of support and resistance and trade in direction of trend.

 

It is well documented on the internet and nothing new.

 

With enough practice and chart time anyone can capture it.

 

It is for me a nice blend of indicators and price action.

 

You can use zigzag (or any other fractal indicator) to show you HH, LL, LH, HL.

You can use barry or any other indicator to show sup res.  I don't because I can't find indi that draws an sr on 2 or 3 times retest.

You can use trend indicators.

There are also some mtf (multi time frame) indicators which will give you sup res on higher timeframes.

Then also, get some indicator to give you open of market, yesterday last week, last month high and low.

 

As I have stated before, I don't get the "war" between price action traders and indicator traders.

Why not use both and get the best blend out of both ?

 

For me (so it is my opinion), oscillators and ob/os trading based on that (and that is a majority of threads here on BOE), simply doesn't work.

 

https://gyazo.com/79...a9c054f2a83e0e9

 

So here is my blend of combination of price action trading (break, retrace, follow trend) with the help of indicators.

 

So why not change the thread name from price action VS indicators to price action WITH indicators ?


  • Mowgli, dasa, charli and 2 others like this

#30 PaititiGold

PaititiGold

    Member

  • Validating
  • PipPip
  • 400 posts

Posted 28 December 2016 - 05:57 AM

Just an example for you..

 

this is weekly chart

XK1wIDu.png now hourly..

xbwgSWf.pngplease guys.. name one indicator that can predict such reverse..

It takes years of solid research to develop such a tool, a lifetime work. Do you think such a tool will ever be shared or sold ?

 

If anyone truly wants to make such a tool you need to consider all the aspects that's needed to develop such a tool, a lot of expertise and creative thinking, lots of hard work, endure plenty painful failures, no funding and never have any guarantee if you will ever succeed or not. I don't advice anyone to do this madness unless you are properly equipped for it and that you are prepared to pay the huge sacrificial cost involved.

 

For most of us it's best we use what's available on the web. Learn to make it work for you.


  • Mowgli, dasa, shaileshm and 1 other like this

#31 fsgi

fsgi

    Member

  • Members
  • PipPip
  • 37 posts
  • LocationItaly

Posted 10 January 2017 - 03:33 PM

Sorry for a brief interruption into the discussion, but I cannot avoid to do so after seeing mechanicalforex cited here. I was member of that community and directly interacted with the owner of all the stuff several times also through skype.

When citing that source, please, remember to make it with a grain of salt. DF, the author, is a good writer, but I fear one should bear in mind the kind of result his methods are delivering. Look at this recent post:
http://mechanicalfor...ve-trading.html

In the chart you see a nice equity curve, very linear (except, not surprisingly, the most recent period). Look at the numbers, anyway. This is a cumulative return of a little more than 3% in 24 years. Sure: you don't "loose money" in a proper sense, but you would be much better off by buying some treasury bonds. This is the myth of mechanical forex: long lasting linear curves, irrelevant of the slope. It is a nice intellectual exercise. If trading has something to do with "making money", then it has few to do with this other activity. Which is indeed profitable once you have a payd site with 400 subscribers paying from 160 to 300$ a year...

I spent more than ten years of life studying algorithms, with "indicators" that perhaps few have ever imagined, and data mining, classification procedures, neural networks, decision trees and support vector machines.... I think there are at least three things I could recommend:

1. Good price action trading is based on patterns WITHIN context. This is what any computer algorithm, so far, is less able to do than human eye (well trained...)

2. DF says it all: market are "noisy". Is it really true? Or a good sense of market microstructure would explain most? Sure, once you decide that you will focus on long time frames only (most of mechanicalforex systems are based on daily bars), then many details seem just to be "noise", and you have to "filter" it out with indicators...

3. Treated as "indication", indicators can help very much "seeing things" the right way. Price does not respect indicators, it determines them. Taken as "mechanical" decision-makers they often fail, or allow us to exctract from the markets edges that are ridicously lower than those that many people are extracting in this forum.

Sorry for being a bit crude, but I hope somebody would appreciate a bit of realism.
  • hp699flva likes this





Also tagged with one or more of these keywords: price action, indicators

0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users


USA REGULATION NOTICE: There are many binary options companies which are not regulated within the United States. Most of these offshore companies are not supervised, connected or affiliated with any of the regulatory agencies such as the Commodity Futures Trading Commission (CFTC), National Futures Association (NFA), Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).

It is our STRONG opinion that you do not operate with any unregulated brokerage firm as they may steal or try to scam you out of every dime you have. Please take notice that any unregulated trading activity by U.S. Citizens should be considered unlawful.

Risk Disclosure: Binary Options Edge does not accept any liability for loss or damage as a result of reliance on the information contained within this website; this includes education material, price quotes and charts, and analysis. Please be aware of the risks associated with trading the financial markets; never invest more money than you can risk losing. The risks involved in trading binary options are high and may not be suitable for all investors. Binary Options Edge doesn't retain responsibility for any trading losses you might face as a result of using the data hosted on this site. The data and quotes contained in this website are not provided by exchanges but rather by market makers. So prices may be different from exchange prices and may not be accurate to real time trading prices. They are supplied as a guide to trading rather than for trading purposes.