Trading with PA "No Indicators"

[drsushi 10]

I joined a google group of traders that trades with price action alone. They use support and resistance areas from higher time frames and use multiple time frames down to 5, 8 or 16 tic charts for entry. The theory is based on six possible scenarios. A double top or lower high, these are both high failures, a double bottom or higher low, these are both low failures and higher highs and lower lows. If the low or high failure takes place at significant enough support or resistance there may be a trade to be had. I've attached (hopfully) 3 charts of 777 tic, 110 tic and 16 tic that is annotated. This is not something I put together. One of the traders in the group did to describe the method they trade by. I posted it for the interest of others and I'm also curious of the opinons of the followers of TL. I for one have struggled a great deal with the right indicator, TS add-on, timeframe blah blah blah and to tell you the truth this makes very good sense to me and If I use it with pivots and VAL POC and VAH for S/R I'm hoping it will have some merit. I'm fairly new to trading, so I'm hoping others with more experience will give thier thoughts.

 

David

[CandleWhisperer 10]

Sounds very interesting. I think this method, or price action trading, in general is the way to go.

 

PP has shown a similar idea with 2 timeframes. 1 has various important "pivot" or "Key" levels and the other is used to make trades off of based on price/volume action at these levels.

[torero 10]

I use mainly price action with S/R areas and chart patterns, sometimes with volume and Fibonacci to trade. It's the right way to learn to trade without too many indicators. Price action tells alot more than indicators since they are derived from price. You're on the right track but that's just me. I'm sure others have their own opinions on this.

[brownsfan019 17]

I joined a google group of traders that trades with price action alone. They use support and resistance areas from higher time frames and use multiple time frames down to 5, 8 or 16 tic charts for entry. The theory is based on six possible scenarios. A double top or lower high, these are both high failures, a double bottom or higher low, these are both low failures and higher highs and lower lows. If the low or high failure takes place at significant enough support or resistance there may be a trade to be had. I've attached (hopfully) 3 charts of 777 tic, 110 tic and 16 tic that is annotated. This is not something I put together. One of the traders in the group did to describe the method they trade by. I posted it for the interest of others and I'm also curious of the opinons of the followers of TL. I for one have struggled a great deal with the right indicator, TS add-on, timeframe blah blah blah and to tell you the truth this makes very good sense to me and If I use it with pivots and VAL POC and VAH for S/R I'm hoping it will have some merit. I'm fairly new to trading, so I'm hoping others with more experience will give thier thoughts.

 

David

 

David,

Nice examples, thanks for sharing.

 

My 2 cents on this type of trading:

 

1) It can work and be very profitable.

2) It takes TIME to get it down however.

3) Drawing those S/R lines in REAL TIME can be challenging.

4) Exits are key to whether you have profitable or failing trades.

 

The biggest issue is where to exit on these type of trades. Do you simply wait for a reversal or MIT an order at/near the next level or take a fixed profit? Depending on what you choose, that can be the difference between a profitable trade and a loser.

 

You also posted this in the candlestick corner, so I would mention that using your S/R lines in conjunction with candlestick patterns that confirm an area is being defended is a great combination!

 

Good luck and keep the thread going!

[drsushi 10]

Brownsfan,

 

I agree with everything you said. My thought is to use floor pivots (daily, weely, monthy, yearly) and MP value areas and POC's as support and resistance levels and see how pirce action behaves around those areas. Also, my assumption is that if I stay with the trend on a higher time frame that will reduce risk. I hope that is an accurate statement. Also, my intension would be to use specifc targets for profit such as 4 tics, 6 tics and then moving my stop to B/E or B/E +1tic and letting my other 1/3 of the position run, but manage the trade and take profit at s/r. The last 1/3 should be a free trade at that point based on profit of the first 2/3 and moving the stop. This would be on the ES. I'm not looking to make a fortune in a day. If I can do what I just described on a consistent basis I would be very satisfied. Am I out of my mind or is it reasonable?

 

David

[brownsfan019 17]

Brownsfan,

 

I agree with everything you said. My thought is to use floor pivots (daily, weely, monthy, yearly) and MP value areas and POC's as support and resistance levels and see how pirce action behaves around those areas. Also, my assumption is that if I stay with the trend on a higher time frame that will reduce risk. I hope that is an accurate statement. Also, my intension would be to use specifc targets for profit such as 4 tics, 6 tics and then moving my stop to B/E or B/E +1tic and letting my other 1/3 of the position run, but manage the trade and take profit at s/r. The last 1/3 should be a free trade at that point based on profit of the first 2/3 and moving the stop. This would be on the ES. I'm not looking to make a fortune in a day. If I can do what I just described on a consistent basis I would be very satisfied. Am I out of my mind or is it reasonable?

 

David

 

Can it be done? Of course!

 

Will it be easy? Of course NOT.

 

The premise sounds good now it's a matter of testing in real-time and see how it goes. Feel free to start a new thread or continue in this one about what/how you are using your ideas.

 

Good luck!

[CandleWhisperer 10]

David,

.......

3) Drawing those S/R lines in REAL TIME can be challenging.

............

 

That is why it might make more sense to use static levels that are plotted before the day starts.

 

I have not read the book so I can't recommend it, but there is a book specifically about this type of method called "Price Action Trading".

 

Some levels to think about could be:

 

1. MP levels (POC, VAH,VAL)

2. Yesterday's High (YH)

3. Yesterday's Low (YL)

4. Day Before Yesterday's High (DBYH)

5. Day Before Yesterday's Low (DBYL)

6. Key numbers (aka Floor pivots)

7. Actual pivot levels-places where the market did react/retrace/stall.

[brownsfan019 17]

And of course the next question is - what levels do you use and why? Use them all and your chart will look like a mess of horizontal lines everywhere. If you put enough lines on your chart, some will look like they nailed the HOD or LOD. Some will just get in your way.

 

And the follow up question: are static, fixed lines that are based on YESTERDAY'S price action good for determining TODAY'S price action? Food for thought.

[drsushi 10]

I agree with the point that drawing the s/r lines can be a challenge. I believe the folks in the group do as you stated ant drawing them in advance such as the night before. Some S/R levels can be intraday levels as well. I like the concept of using floor pivots and the MP levels and I think that YH and YL are valid as well. One doesn't have to have every line on a chart. Actually, what I do in TS is have multiple workspaces. One workspace may be my Market profile workspace with POC;s and VAH and VAL. I then have a seperate workspace for pivots. It's farly easy to switch tabs. If price starts to approach a level one can go to a lower time frame chart with no lines, or draw in one horizontal line where price is approaching and see how it starts to react. I use pivots and MP by Suri Dudella and his stuff can be broadcast to as many charts as you want. So if I have a daily chart as a source chart of pivots, for example, I can braodcast the pivots to any chart of any other timeframe. I don't have to draw anything. This is not a pitch for his stuff it just works for me.

 

David

That is why it might make more sense to use static levels that are plotted before the day starts.

 

I have not read the book so I can't recommend it, but there is a book specifically about this type of method called "Price Action Trading".

 

Some levels to think about could be:

 

1. MP levels (POC, VAH,VAL)

2. Yesterday's High (YH)

3. Yesterday's Low (YL)

4. Day Before Yesterday's High (DBYH)

5. Day Before Yesterday's Low (DBYL)

6. Key numbers (aka Floor pivots)

7. Actual pivot levels-places where the market did react/retrace/stall.

[torero 10]

Also, my intension would be to use specifc targets for profit such as 4 tics, 6 tics and then moving my stop to B/E or B/E +1tic and letting my other 1/3 of the position run, but manage the trade and take profit at s/r. The last 1/3 should be a free trade at that point based on profit of the first 2/3 and moving the stop. This would be on the ES. I'm not looking to make a fortune in a day. If I can do what I just described on a consistent basis I would be very satisfied. Am I out of my mind or is it reasonable?

 

David

 

This won't fly. The market does what it does and won't move to your rhythm at 4 or 6 ticks and expecting it not hit your breakeven. This is what price action is all about: reading what the price tells you where the nearest low is and nearest high and respect these level. You should be putting your stops above or below and not a fixed tick number then use S/R as your target and/or stop loss levels. The 2 go hand in hand S/R and price action.

[drsushi 10]

i will have to post a chart tonight to show you what I mean.

 

David

[drsushi 10]

Here is a chart of a possible trade. I did not take this trade and at the same time of trying to avoid cherry picking a perfect example, I also wanted to show and example that would explain the concept. I forgot to draw in the possible stop, but it could be just below the HL on the 16tic below entry or just at or just below the pivot if entering sooner.

 

The 4 to 6 tics I think is an acceptable profit target. I'm not sure if i'm understanding your comment. If 4 tics is not an acceptable profit target then it wouldn't be worth even trading. The idea is to have say 3 contracts and with a stop just below or above the previous low or high. The stop could be 1-2 points. If I hit my first target of 4 tics moving the stop to BE-2tics seems reasonable. Could go to BE or BE +1. Or, if second target is hit then move the stop to BE. From what I have learned, and I will say maybe the most valuable thing I learned from TTM is reduce risk. The fast we can get the stop to BE, of course with out getting stopped out too soon the better. In the attached example the trade played out in a positive way. The last third can be exited on some criteria or, manage it anyway you want moving the stop to preserve profit. I don't know the best way.

 

The Sanuk Group on Google talks about this method and many or most of the traders in that group trade with price action in this manner. They may use volume bars or minute charts, but many of them speak of this method. I am just presenting here, but it really hit home with me. Anyway, I've gone on long enough. Feel free to comment. One last thing. I do like to use the Volume Delta OSC that someone created on TL. It shows divergences very nicely and can give a heads up to a turn. Also, the way price action was explained to me is that its the buyers and sellers going at it and one of them will take control which in depicted in price. This makes sense to me.

 

David

[mister ed 10]

This is an interesting topic. I hope this input is not too far removed from it...

 

I think if an indicator can show a certain aspect of price &/or volume &/or time behaviour that you believe is important then it should be used. If you can look at price &/or volume &/or time and trade/invest without the aid of any 'indicator' then that is right too. I actually believe that the better a trader gets the more likely it is she (or he) will use only price, volume and time. I suppose my point here is that there is no one right and wrong way.

 

I say all this because up until recently I have been a 'no indicator' believer (not because I am one of those good traders - far from it). But I have recognised I need to see a relationship between price and volume that my price and volume charts were not showing me clearly, and so now I use an indicator to help me see that relationship. I think the key to using an indicator is to fully understand what it is showing, fully understand the mathematics of its calculation (most indicators are simple enough for me to understand the maths...so anyone can!) and fully understand it limitations and constraints. I would also add that my use of the indicator does not extend to it being the buy/sell trigger - I would be interested if anyone does use an indicator in this way as I believe the entry and exit decisions comes from price alone.

 

 

 

Another point - what is an indicator?

I use the volume at ask minus the volume at bid on my charts - is this an indicator? I think of it as data generated by the market, it only becomes an indicator if I do something like apply a moving average to it.

[BlowFish 10]

And of course the next question is - what levels do you use and why? Use them all and your chart will look like a mess of horizontal lines everywhere. If you put enough lines on your chart, some will look like they nailed the HOD or LOD. Some will just get in your way.

 

Yup absolutely agree you can end up with lots of lines depending what you use. Just using highs and lows off an hourly can end up with lots. Picking the right lines can be a bit of an art. It's not hard exactly as with all things it needs experience (work) Looking for 'clusters' is not a bad idea, these form if a price has been tested a lot.

 

And the follow up question: are static, fixed lines that are based on YESTERDAY'S price action good for determining TODAY'S price action? Food for thought.

 

The answer to that is an un-qualified YES. Are they good for predicting todays action the answer would of course be NO. My favourite example the good old floor pivot, yesterdays H+L+C/3 is a simple but effective sentiment indicator. Price above bullish price below bearish. Simple.The 50% spot 'works' good too H+L/2. As does the PoC. etc. etc. No predictive value but gives a clear and un ambiguous indication of "where you are".

 

As an aside. In the S&P, 70% of days, price will come within 2 ticks of the floor pivot. Heres the interesting thing the stats are very similar on an hourly chart or a 30 minute chart (using the previous bars 'pivot') this suggests to me there is some inherent usefulness in the number rather than being self fulfilling because everyone is watching.

 

Anyway sorry for drifting off topic but you did ask the question.

 

Personally I think using PA (be it candles bars or maybe VSA) to determine what is happening in areas where things might happen (previous S/R, MP etc.) Is a fantastic way to trade.

 

Cheers.

[torero 10]

Here is a chart of a possible trade. I did not take this trade and at the same time of trying to avoid cherry picking a perfect example, I also wanted to show and example that would explain the concept. I forgot to draw in the possible stop, but it could be just below the HL on the 16tic below entry or just at or just below the pivot if entering sooner.

 

The 4 to 6 tics I think is an acceptable profit target. I'm not sure if i'm understanding your comment. If 4 tics is not an acceptable profit target then it wouldn't be worth even trading. The idea is to have say 3 contracts and with a stop just below or above the previous low or high. The stop could be 1-2 points. If I hit my first target of 4 tics moving the stop to BE-2tics seems reasonable. Could go to BE or BE +1. Or, if second target is hit then move the stop to BE. From what I have learned, and I will say maybe the most valuable thing I learned from TTM is reduce risk. The fast we can get the stop to BE, of course with out getting stopped out too soon the better. In the attached example the trade played out in a positive way. The last third can be exited on some criteria or, manage it anyway you want moving the stop to preserve profit. I don't know the best way.

 

The Sanuk Group on Google talks about this method and many or most of the traders in that group trade with price action in this manner. They may use volume bars or minute charts, but many of them speak of this method. I am just presenting here, but it really hit home with me. Anyway, I've gone on long enough. Feel free to comment. One last thing. I do like to use the Volume Delta OSC that someone created on TL. It shows divergences very nicely and can give a heads up to a turn. Also, the way price action was explained to me is that its the buyers and sellers going at it and one of them will take control which in depicted in price. This makes sense to me.

 

David

 

My point was 1 pt (or 4 ticks) is acceptable, but moving to breakeven after such a small push forward is too close, and from my experience trading ES (and I tried scalping it and failed miserably at it) in the past, there will tendencies to hit breakeven alot. But others seem to do ok, go for it.

 

What I am saying is let the market dictate where the stop level is and not choosing to breakeven you determine; the area you choose to by a fixed amount will have a likelihood of get hit is high. If this is the case and you're scalping, you'll be paying lots of commissions and little profits. Just my opinion and experience.

[brownsfan019 17]

As an aside. In the S&P, 70% of days, price will come within 2 ticks of the floor pivot. Heres the interesting thing the stats are very similar on an hourly chart or a 30 minute chart (using the previous bars 'pivot') this suggests to me there is some inherent usefulness in the number rather than being self fulfilling because everyone is watching.

 

Interesting BF - can you provide some info to substantiate this? You got my curiosity now.

 

Also, silly question - what exactly are you referring to as the 'floor pivot'. I think I know, but some clarification would be good so we are on the same page.

 

[BlowFish 10]

Interesting BF - can you provide some info to substantiate this? You got my curiosity now.

 

Also, silly question - what exactly are you referring to as the 'floor pivot'. I think I know, but some clarification would be good so we are on the same page.

 

 

Hi Brown by floor pivot I mean yesterdays (H+L+C)/3.

 

Short answer is no I cant. Funny, it was exactly the same sequence that got me to check for myself. Basically someone said to me 70% of the time blah blah blah... I thought hmm thats intresting and went anyway thinking about how I could prove it for myself.

 

I got a few years H L C data into excel, put the calc into another cell then tested to see if H or L hit the calculated pivot. I guess theres an outside chance the spreadsheet is hidden away somewhere, I'll keep an eye open for it.

 

Cheers,

 

P.S. Sorry that this is still a bit off topic but couldn't resist this chart of todays ES showing price turn of the PP to the tick. Obviously this is partly self fulfilling but its kind of neat when its this clean. PP is horizontal red dashed line.

[brownsfan019 17]

Hi Brown by floor pivot I mean yesterdays (H+L+C)/3.

 

Short answer is no I cant. Funny, it was exactly the same sequence that got me to check for myself. Basically someone said to me 70% of the time blah blah blah... I thought hmm thats intresting and went anyway thinking about how I could prove it for myself.

 

I got a few years H L C data into excel, put the calc into another cell then tested to see if H or L hit the calculated pivot. I guess theres an outside chance the spreadsheet is hidden away somewhere, I'll keep an eye open for it.

 

Cheers,

 

P.S. Sorry that this is still a bit off topic but couldn't resist this chart of todays ES showing price turn of the PP to the tick. Obviously this is partly self fulfilling but its kind of neat when its this clean. PP is horizontal red dashed line.

 

I appreciate it BF.

 

This should really belong in a new thread b/c it's a great tool to watch.

[email 10]

Hi Guys,

 

Is this thread still alive, if so, I would like to make a few comments.

Cheers,

email

[brownsfan019 17]

Hi Guys,

 

Is this thread still alive, if so, I would like to make a few comments.

Cheers,

email

 

You can bring it back to life email! Have at it!

[BlowFish 10]

Go for it email! I've spent a couple of weeks going through the Sanuk material and even hung out in there room a bit. It seems like a valid information to me. Having said that I'm 'sold' on PA. It can be used to find areas to trade, it can be used to trigger entries, it can be used for stops and it can be used for targets. Pure and powerful.

[james_gsx 16]

I continually find myself using PA and basic S/R for my trading. I have an oscillator and $tick to kind of help eliminate otherwise bad trades. After the close I plot the open, low, and close for the next day and scalp around those areas using basic candlestick analysis. So far it's been profitable, and the more screen time I get the better I do. But it should be noted, I have no problems finding support and resistance areas in real time, I guess that just comes with the screen time.

 

It works very well during range bound movements, but during big trends it's easy to miss the major trend. I will try to take screen shots and possibly a video this week to show everyone how I do it and maybe others could see what I could improve on.

[email 10]

Hello to everyone in this thread and thanks to drsushi for starting it.

 

drsushi ,you are very fortunate to have found that group, very neet. I am a big pivot point trader myself and would be paralyzed if I did not use them.

I see most guys here use the same method I trade with; floor traders pivots, YH, YL, UVA, LVA. A good understanding of chart patterns and candles are essential, especially at resistance or support.

Always on the lookout for triangles, AB=CD, Gartleys will give you a good edge.

 

I love this thread because it hits on most of the things I look at. Lately while I have been using the BID/Ask volume indicator on my charts (actually I would like if we could discuss this further). When approaching a key pivot, I notice many times that there may be a long bullish candle but the bid volume is twice as much as the ask, that is a good clue that we may be reversing.

 

Now the big thing the caught my attention in this thread was when drsushi explained his stops and profit taking. With the volatility we have been having lately I do not see how I could trade with less than a 3.5 point stop in the ES.

I enter my trades at either PV or VAH ot VAL, YH, YL or one of my De Mark projection points (tomorrows Projection, High of the day Low of the day) and want to ride a wave as much as possible so a one or two point profit is not my goal. You have to look at the big picture, if it fails at one of our points in the morning like, fills the gap and turns around or YH I want to ride that wave for at least six to ten points, maybe more, not two points, otherwise I am going to be in and out all day. I am not saying you cant do that just its not my style.

Another thing about stops as Torero mentioned you just can not pick a one or two point stops arbitrarily, you have to hide behind a wall or your going to get shot. What I mean is that the volatility and the way the market moves your stop will be toast if you do not place your stop below a pivot (and far away or they will hit it) or a MA, something. To make it float is nuts, unless your already in the money by six to ten points, thats different, but to do that at the start is going to get you stopped out allot, IMHO. Ok, I`m going to turn it over to you guys now.

 

Cheers to all,

email

[drsushi 10]

email,

 

I may have been a little unclear in terms of the stop strategy. I agree that the volatility could kick one out a lot. I by no means am an expert and am still learning. Much of the info I was sharing I have learned from the google group. I think the intent of the strategy is to place a stop above a previous high or below a previous low depending on the direction of the trade, of course. In the group they discuss using 3 time frames. The longer time frame gives general trend and the lower timeframe give the trade setups and an even lower timeframe is used for entry. The main method discussed in the group is the use of the 777tic for trend, 110 tick for setup and 16 or 8 tic for entry. Higher timeframes such as a 60 minute or 240 minute etc are used as well. One thing that is emphasized a lot is that if you see a double top on the 110 tic and then a lower high on the 110 tic you that would indicate sellers taking control. Assuming the trend is down that day you could enter short with a stop above the previous high wich may be no more than 2 points. Please don't shoot the messanger. This is what is taught/shared in the group. As far as exits go I've read concepts of scaling out in thirds or quarters mainly from the Trade the Markets guys and the theory is that the sooner you can move your stop to break even or break even minus a tic or two the less risk you have. If you scale out in thirds at 4 tics for the first third, 6-8 tics for the second third and open target on the last third with a stop at break even after the second target, even if the last third scratches you have a profitable trade. That is the theory. Is it a good one? I don't know. I too would rather hold for 5, 6 or 10 points. I would love to hear about other exit strategies. One thing I was thinking of would be to take a 100% fib projection from the prior swing as a first target and/or a 127.2 extension as a target. I don't like the idea of limiting myself to a 1 point or 2 point target, but it does seem smart to scale out and limit the risk as quickly as possible. If you get a runner or even 6-10 points on your last third that is still pretty good, isn't it? Let me know.

 

If you want me to post a chart of example trades let me know.

 

David

[CandleWhisperer 10]

And of course the next question is - what levels do you use and why? Use them all and your chart will look like a mess of horizontal lines everywhere. If you put enough lines on your chart, some will look like they nailed the HOD or LOD. Some will just get in your way.

 

And the follow up question: are static, fixed lines that are based on YESTERDAY'S price action good for determining TODAY'S price action? Food for thought.

 

Simply, Yes.

 

They are far better than mathematically derived numbers like "Floor Pivots". Key Numbers, aka floor pivots, derive their utility from two things: regression to the mean, and self fulfilling prophecy.

 

Market profile lines have as their basis the concept that because the market found support/resistance at this level today, all things being equal it should find the same there tomorrow. The market has memory. It knows when a price level is reached that found sellers/buyers the previous time the level was reached. If 510 on the emini, for example, brings in the bulls today as they see value, there is a good chance they will again see value at that level going forward.

 

I have been playing with this concept a bit after reading an article from Straightforex.com. Instead of using key numbers, they use what they call a "Market Map". The map consists of:

 

1. YH (Yesterday's High)

2. YL (Yesterday's Low)

3. DYH (Day before yesterday's High)

4. DYL (Day before Yesterday's Low)

5. PP (Pivot Point) (O+L+H)/3

 

The first 4 are already HUPs (Hold Up Prices) and may continue to be. One thing the map tells us is if price is above the PP the trend may be up. If Price is above either or both YH or DYH and above the PP the trend is up. The reverse would be true for a down trend.

 

After reading a couple of threads on this forum, I have become predisposed to the Pivot Range concept that Pivot profiler talked about. So I add the Range to the map, plus a couple more HUPs.:

 

1. YH

2. YL

3. DYH

4. DYL

5. PMH (Pre Market High= highest high made between 5pm close and 2am open NY time)

6. PML (Pre Market Low= lowest low made between 5pm close and 2am open NY time)

7. PP (H+L+(2*C))/4

8. PRH (Pivot Range High)

9. PRL (Pivot Range Low)