Why Price Action Trading Is Garbage
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- Опубліковано 12 вер 2024
- Price Action Trading is a popular day trading strategy that utilizes many common mistakes to fool traders. By taking on excessive risk the strategy appears profitable at first, but falls apart under further scrutiny.
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Hypothetical Performance Disclosure:
Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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This guy managed to model all discretionary price action traders across all markets, and timeframes for all time. He did this using Ninjatrader and is still under the age of 60. An amazing feat of guru proportions.
I 100% agree. The best traders trade on probability not price action.
I use price action to see the structure of the market. Using it you can identify the trend and also when it's broken and where in short term the market will go to. You also can see how dominant a party is based on the auction velocity. It's a part of trading but there is MUCH more to it
Probability alone won't save you, lol. You need an edge, and that involves studying price action.
So according to you, orders move price (and I agree). Price action is simply stripping away as much technical/mechanical/indicator based analysis as possible, in order to get an idea of that order flow (without using footprint charts and so on). For example, you see a swing high where stop orders will be sitting, price comes and runs those stops and prints a big green bar. That's price action.
But the fact that orders are moving price doesn't mean "price action is garbage" or "price is bs". The whole point is to buy and sell things at different prices. If there were no prices, and just orders hitting the book, wouldn't make a lot of rational sense would it lol
I think you're being divisive and trying to hate on al brooks because you don't like scalping and you are still hung up on static R:R values that only exist in the abstract. Im not sure how scalping is excessive risk that other participants aren't willing to take on...other participants are taking on their own risks and if your risk is 1:3, your win rate can just drop enough to where you lose just as much money as a 2:1 scalper does. I dont worry about RR (I don't disrespect it on purpose, but I don't try to micro manage it in the abstract). If I take a trade, I look for places where lots of stop orders are going to be sitting on the other side to propel prices in my direction, and other things like that. I call it price action, you call it order flow.
The difference is that order flow exhibits many stylized behaviors that are well proven with empirical literature. We have data to back up assertions about the market behaving a certain way, and we have solid models to explain why the market microstructure leads to those behaviors. It's not based on conjecture. It's based on data.
Now taking on excessive risk is a great way to make money. You'll have to deal with the fat tails that take out most people, but it can work. The issue is that the short term profits don't tell you anything about the efficacy of the signal. Any such system is likely to show profits in the short term regardless of the signal used. To see how the strategy actually performs you'll need more samples.
Which brings us back to the challenge I made in the video. Prove it over a large dataset of 5 years or 10,000 trades.
@@SpeculatorSeth ok but whatever is empirical in order flow can't be abstracted from what gets printed to a candlestick chart. And even something like an RSI, being derived from the same data, can't have even a tiny bit of irrationality in its presentation, unless you allow for a break in empiricism somewhere in order flow as well.
I think some people grasp pictures easier than they grasp numbers. Maybe some people are so much better at grasping pictures vs numbers that whatever proximity to truth they give up by not watching the DOM etc, they make up for with their subtle pattern recognition etc. And if its true that orders move price than they are still trading on that principle either way.
@@timchurch2390 I personally think it's more likely that the successful technical traders are just subconsciously biased by what they know about the fundamentals more than they realize. Order flow is great at helping to select a more favorable entry, but for direction you need predictors of order flow.
@@SpeculatorSeth what are the predictors of order flow?
@@Frag1ty I talk more about possible predictors of order flow in this video: ua-cam.com/video/_l5hP7fgtyY/v-deo.html
When you observe price, what you are looking at is a history or traded prices. These trades have already happened. When you look at a chart of price over time, you are literally looking at a representation of completed trades. Some interpretation of price, as long as you can relate it back to market psychology will always be relevant, no one interpretation will always be correct. Interpreting price action will always be relevant, and it will always be backwards-looking. You will always be looking at the past.
It seems to me that if you have an edge that you can back test and you get results over a large number of trades, it doesn't matter if you use raw price action with a limited number of indicators or an arsenal of technical indicators/ technical analysis.
That's assuming you're entries and exits aren't random... hint, it probably is. Especially if it's price action trading!
I am Trading for 4 years now and yes that is what discoverd too
It’s good u are calling this out.
Thanks for the information bro earned my sub for sure
so the people make money using price action is not true money??
I really wished i saw this vid when I started trading. After admiting that TA doesn't work, I was opened to a whole new world of logical trading that made me profitable it been now 4 years of consistency without TA,PA and many other retail theories that by now seems stupid and fooling to me😤😤
So what tools are you using?
Oh seth really..I appreached hearing your opinion. Every few years some old technique it fashioned into the new way to trade...I recall way back the the in vogue thing was to buy breakouts lol good video
Price action works because it doesn't work X'D
So, What do you use to make money in the market's.
Watch my video on the inelastic markets hypothesis.
@@SpeculatorSeth both words “in elastic “ and “hypothesis “ are turn-off for someone who doubt in mainstream economics.
Even Orderflow seems like a Advanced and little more scientific version of Al Brooks Price action.
My Only question is; what is the guarantee that you would learn and get better enough at Orderflow analysis and in how many years?
The stylized behaviors of order flow are well proven by academic research. There is zero empirical evidence supporting "price action" strategies.
@@SpeculatorSeth we have discussed it, I am reading papers on In Search of the Origins of Financial Fluctuations:
The Inelastic Markets Hypothesis. at first, I thought it might be something pseudoscientific like Soros's reflexivity theory.
but my question is still there, in how many years you will get better at order flow? secondly, even order flow is secondary information on the trading floor,
i could argue order flow is not valuable as firms are getting in and out 30 times before sticking to a position and you could be guessing trying to read passive and aggressive orders
have you looked at al brooks probably the best argument about your opinion
Al Brooks is a top educator in the space, but I've never seen any empirical evidence coming out of there.
have you backtested? also he has a product with his back tested results very strong evidence @@SpeculatorSeth
I have no idea what this rant was about. He didn't give his definition of price action trading, I've heard several. I'll watch the last 2 minutes maybe it'll make sense.
but the biggest price action influencer out there is ICT. And he has backtested his system and live traded for years now.
The smart money concepts cult seems to think backtesting is just manually looking back on a chart so I highly doubt anybody can produce real backtest results. I have automated the most popular setup. I'll be releasing the strategy, and the data shows that the SMC strategy is failing. That video is still a few weeks out as I have other content I am releasing first.
@@SpeculatorSethI’m Reading my first book on Orderflow, and too be honest it sounds like same Cultish and Conspiratorial Theory like Smart Money at many Instances.
@@SpeculatorSeth DROP THIS NOW PLEASE
I wish I knew this 2 years ago
Price action is overrated only probability and risk management work i didn't meet a single Real guy who create fortune by fkin chart trading by price action
I am also a Trader in DII Firm in India and i said this from my experience
I know this video is only liked by Real profit making traders not By price action MOFOS
I dunno man. Context is important. What happens on charts show context of what has happened. If it didn't matter at all, nobody would buy or sell at different levels.
Say, you know there is a massive news release approaching. Sentiment is down. Fear is abundant. Rates are going up. So you're reasonably sure that the news will be bad. And the markets are going to react. So you wait for the release... but the market is flying. It's going up steadily. It's not going down like you thought it would. Do you just sell anyway, because nothing matters?
I would argue, that you are seeing last price increase steadily. And you're going to take that context into consideration, and maybe re-evaluate your trading plan, or at least sit out and wait. What you are seeing, probably matters? May indicate something?
Also, the title of this upload is rather "clickbaity" if you ask me, it seems like you really want to elicit a reaction, and it doesn't seem to be forming so far.
There is a recent study showing that path dependency can account for 70% of volatility. There are properties of markets that differ from a random walk that practitioners may be able to use to their advantage. That does not give you a timing and direction though, and the study of volatility is still very distinct from "price action".
The human mind is attracted to ideas like price action even when they are ineffective. Which means that redirecting traders to empirically backed information will always be an uphill battle.
@@SpeculatorSeth But you will concede that before making an entry to take a position, you are considering last price and context of the day/week? No matter what source you are using to gain that information from?
@@caseysullivan-myers8834 For edge I am relying primarily on information that does not come from the exchange. Predictors of future order flows such as breaking news. I am primarily concerned about what the next set of orders will be rather than the price. Price history provides almost no directional predictive value.
@@SpeculatorSeth That feels a little bit like a red herring. Orders have an effect on price. If you think something may occur based on whatever information sources you are choosing to subscribe to, the reality is the change of price is only going to happen with orders and you are going to check whether your hypothesis is correct before adding an order of your own.
Price history can show areas of interest with volume. It can show where orders came in heavily, or where there were little. It can show imbalances and or gaps which the market often retraces to repair. Price action does not and will never say "if this > then that".
But it gives you a good idea of what to look for. It helps you confirm any informational edge you may be following. You would be crazy to think that price history is completely irrelevant to how people behave. If price consistently turns at a certain level, it is because orders are coming in at that level. Price cannot tell you who or what is placing those orders, but it responds to them either way. Pick up any decent book on neuroscience and psychology and you will see the relative structure to the way humans interpret things.
Human behaviour is what provides the directional predictive value. Price history is just a source of information. I'm not sure you can apply empirical science to human decision-making.
@@caseysullivan-myers8834 The evidence does not support the theory that predictable human behavior is a dominant force in the market. Most of the empirically proven stylized behaviors originate from market microstructure. Behaviors that emerge from the math due to the very rules of the market. The only major stylized behavior I can think of that is probably due to psychology is volatility increasing during declines. Otherwise what we find is that human behavior is actually quite random especially on short timeframes.
If there was any consistency there then we would be able to prove it empirically. If price tends to bounce off certain levels then where is the evidence? We should be able to show over a large dataset that there is a statistically significant probability of the market reacting in a predictable direction at our predicted price levels. What we instead find time and time again is that the market is statistically efficient. We might think we see patterns, but it is almost always a case of being fooled by randomness.
It's true that orders will move price, but the problem there is that by the time you see the change in price it is already too late. You want to be in a position BEFORE the orders come. That's why you have to predict the orders instead of just trying to follow the crowd. The volume I see after I get in may affect how I manage the trade, but a price movement on its own is very ineffective at predicting what happens next.