Can someone define and explain "price action"?

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jhtumblin
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Postby jhtumblin » Sat Aug 08, 2009 8:19 pm

Ok patriot, hopefully this is the logic you were looking for.

In price action, price moves up when there are more buyers than sellers and price moves down when there are more sellers than buyers. I hope we can agree on that because if not, you are going to lose some serious money.

Now here is the tricky part which I think is confusing you. The statement that "price action is the best, or #1, or only leading indicator" is not wholly true. What drives price again? Not just the number of buyers or sellers but the amount that they are willing to buy and sell. This translates to volume. If you have 100 buyers wanting to purchase 1 share each, but have 25 sellers who are wanting to sell 5 shares each, then guess which way the price is going? Down of course (I hope no one actually needed me to say that).

In essence, the truth of the matter is that price will move up when the majority of the floating supply is held buy the minority of the traders at low or "good" prices. It moves higher when this minority begins to sell to a larger pool of traders who believe that prices are still acceptable, and after this exchange is complete, the move is either exhausted or re-accumulation starts for the next wave. Vice-versa for downmoves.

Anyway, the correct statement should be "Price action with volume is the only leading indicator." From here you get into more complex studies such as Volume Spread Analysis and other discretionary trading methods. This is how I was taught to trade and it works beautifully in equities where true volume is available to the trader. Forex is not centralized so there is still some debate about whether you can make accurate judgment based on the supplied volumes at this time.

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patriotstef
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Postby patriotstef » Mon Aug 10, 2009 6:09 pm

Well I do thank you all for this valuable info... yes, that is the logic I was looking for jhthumblin - thank you much.

I guess the next thing to determine is to know what encourages traders to want to buy or sell as much as they do so we can know beforehand what's getting ready to take place.

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Patch
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Postby Patch » Mon Aug 10, 2009 7:01 pm

patriotstef

I personally don't think why people and the trading heard and the institutions do what they do matters.

The Semafors, the Might Zones, the Regression Lines, etc, et. al. give you an edge as you learn from your own experiences and question others. Lots of reading the threads here, and screen time, and demo trading something asap, and then mini trading small lots etc.

I still don't know how my car runs, I can't build a car, but I drive em every day. I've spent a bunch of time today being able to watch eurusd M5 since 7.30am EST. I entered using TRO Buy Zone via Kritonite, then added semafors and MZs and regression. Along the way down, I checked the retracements with FIBs, and my exit strategy is to exit after current high exceeds previous high (although I will close the trade at 4pm regardless because we are going to my son's resturant for dinner this evening). I am not sure what exactly price action is, but I've been watching the tide go out all day.

And keep asking lots of questions, and keep things very simple. Notice my chart has to much stuff on it causing confusion. Next task is to reduce the chart clutter.

Patch
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In VA
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monolisa
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Postby monolisa » Mon Aug 10, 2009 11:37 pm

I think it helps if you understand the basic of how things work - you never know one day when your car breaks down it might come in handy :P

A simple analogy: Most people knows why lightning occurs, but the cave man did not. What did he feel when it happened? Fear (the "no-no" emotion in trading) because he simply didn't understand why.

Price moves because of net demand/supply. jhtumblin gave some really good points.

Lis
"Know your enemy and know yourself, find naught in fear for 100 battles. Know yourself but not your enemy, find level of loss and victory. Know neither your enemy or yourself, wallow in defeat every time." - Sun Tzu

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Patch
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Postby Patch » Tue Aug 11, 2009 5:01 am

Hi Monolisa

Thank you for your thoughtful points.

Some where there is a balance point between action and analysis paralisis. Do you think a new trader would learn more by opening a demo and picking a trading approach or strategy and beginning demo trading; or first learning all about each or several aspects.

Thinking about my driving, I began driving without knowing much about anything, other than what to do with the ignition key, where to put the gas and how to check the oil and away I went. It was as the car broke down and I ran into problems that I started learning about what to do, and how to fix things with the help of friends. Then I bought a 1960 Alfa Romeo spider, got a ticket as I towed it home, and in blown engine was in a box. I suggest learning by doing, and learning from demo, then mini mistakes beats the alternative. Please fill in my blind spots. Or perhaps personality plays a great roll also, different approaches for different people. Though analysis paralisis is a real detriment.

I love what dragon33 said today, he kept saying to himself, "if I can loss it, I can earn it back". I've been saying that and that "if others can learn to trade successfully, I can learn to trade successfully". Being a part of, and reading Kreslik has been a great help to me and my family's future.

Thank you very much Lis,

Patch
ENOUGH being a Yalie for me Back to the Sea. "What i can lose, i can win" "YES YOU CAN" - dragon33 -"Pick one method and one pair and stick with them until you master it. "The choice is yours - success or failure." TRO

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monolisa
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Postby monolisa » Tue Aug 11, 2009 5:18 am

Patch,

A new trader needs to know some basic stuff before he/she begins trading. I don't think much time is needed to understand the concept of supply and demand and what forex is about.

Using the example of driivng, you need to learn how to drive before you can drive safely. The information you learned won't make you a pro. But if you wish to drive like a pro you need trainings, experience and the right mindset.

Regarding demo trading I don't think it is really that useful. Live trading provides the best environment to teach you how to handle and overcome your fear, frustration and greed. Control your loss and you would be fine.

I am glad to know that you have a goal in mind. Trade well :)

Lis
Last edited by monolisa on Tue Aug 11, 2009 5:27 am, edited 1 time in total.
"Know your enemy and know yourself, find naught in fear for 100 battles. Know yourself but not your enemy, find level of loss and victory. Know neither your enemy or yourself, wallow in defeat every time." - Sun Tzu

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Patch
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Postby Patch » Tue Aug 11, 2009 5:24 am

monolisa

Yes you are right, I did take drivers ed before I got my license, and had some practice driving also. I'd also been driving our family car in and out of the garage and up and down our driveway for years.

What fun. What are the basics. I think the hardest concept to understand is shorting.

Way past my go to sleep time, till the marrow,
God bless and keep you and your loved ones,

Patch
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In VA
ENOUGH being a Yalie for me Back to the Sea. "What i can lose, i can win" "YES YOU CAN" - dragon33 -"Pick one method and one pair and stick with them until you master it. "The choice is yours - success or failure." TRO

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Postby patriotstef » Tue Aug 11, 2009 1:25 pm

TRO Buy Zone via Kritonite


What is "Kritonite"?

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Patch
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Postby Patch » Tue Aug 11, 2009 2:16 pm

patriotstef

Sorry, I tried to guess how to spell "KRYPTONite" late last night. it was Helmy's original id handle. He has now changed it to Helmy HAR but he will always be Kryptonite to me. He works along with csbueno at Simple System thread. He is using TRO's buy-sell zone. I've set up a MT4 window and been demo trading using it for a few days now and have spent as much time as I can following the simple rules, watching, and thinking and learning. One thing has come through loud and clear is MO's words that the market is always doing something, but doesn't always do the same thing in the same way, not only from day today, but even moments to a few moments later--different. I've read prochargedmopar say he has spent countless hours watching live chart formations movement's, and more on completed, static charts--great ways to learn about price movements.

Be always careful, and move slowly. Build a base of good trading habits, and that will serve you well. I believe the big whales opened Forex Trading to us small fish retail traders, so they would have more fish in the pond to fatten their belly profit pockets with, ie we've been invited in the water, so they could grow their profits even more and faster. And what great marketing promotion.

The men and women who make this look easy have already worked and searched and paid their dues in time, blood, sweat and frustrated tears and great frustrations and losses, at times. Once we pay our dues...wow. --Patch

PS URL to Simple System:

http://kreslik.com/forums/viewtopic.php ... &start=100

Sorry forgot: "Kriptonite" is a rock from the planet Krypton, that is the only thing that can weaken and kill Superman, an American hero that can leap over building at a single bound, and he stands for Truth, Justice and the American way. I grew up in the 50s watching the b&w TV series about the Adventures of Superman.
ENOUGH being a Yalie for me Back to the Sea. "What i can lose, i can win" "YES YOU CAN" - dragon33 -"Pick one method and one pair and stick with them until you master it. "The choice is yours - success or failure." TRO

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Postby leveragedopinion » Sat Aug 15, 2009 3:31 am

It's strange there can be so much debate about PA, like it's a unicorn or santa clause or something.

Price action is simply playing probabilities based off of the formations of the bars that represent price. Pinnochio bars, engulfing bars, all sorts of bars that signify reversals or continuations.

The downside is that PA patterns are completely unreliable on TF's less than H1, and even that is risky because perfectly good PA on a 4H, daily, or weekly chart will often pay at least 1:1(though usually more), but PA on H1 and below has an equal chance of failure as it does success.

Most of the things I've read suggest PA is simply not applicable to scalping.

But if you want to know more, check out "Pring on Price Patterns" by Martin Pring, or TraderDante's H1 pin bar thread over at trade2win, or James16 thread at forex factory.

These are examples of how people trade PA.

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