Price Action Vs. Trading Indicators | The Old Battle Settled (2024)

FAQs

Price Action Vs. Trading Indicators | The Old Battle Settled? ›

Both price action

Some traders may find success with SMC strategy by leveraging the power of social media sentiment, while others may prefer price action strategy for its reliance on technical analysis and historical price patterns. You can still use both and Ace your trade.

In their toolkit for market analysis, professional traders often blend price action patterns with tools from technical analysis to inform their discretionary trading decisions.

Another benefit of price action trading strategies is their effectiveness. Because they are based on the movement of prices, which is a reflection of market sentiment and trends, they can provide a high level of accuracy when predicting future market movements.

While it is difficult to predict the future, it is unlikely that price action trading will become completely obsolete someday. This is because price movements and patterns are based on human behavior and emotions, which are unlikely to change drastically in the near future.

Price is Better Than Indicators

Price action traders often think their method is always better. However, price action and indicators are quite similar. Both use price info from charts like candlesticks or bar charts. Indicators just apply a formula to the same info.

The answer comes down entirely to the individual. We suggest avoiding SMC if the flaws above irritate you, especially if you already know basic price action. SMC is not going to give you a special advantage over regular retail price action traders.

RSI is mostly used to help traders identify momentum, market conditions and warning signals for dangerous price movements. RSI is expressed as a figure between 0 and 100. An asset around the 70 level is often considered overbought, while an asset at or near 30 is often considered oversold.

A seasoned trader will tell you the four types of price points and that the closing price is the most important one. Successful people don't do different things, they just do things differently. Following these winning traits of winners improves an average trader's odds of success significantly.

But as a fact, Richard Wyckoff is one of the god fathers of Price action trading and the first trader to intensively analyse volume with price movement.

What is the best time frame for price action strategy? ›

For day trading, 15-minute charts and 30-minute charts are the offer optimal results. Day traders who use indicators in their day trading strategy can use a 15-minute or lower time frame. In the case of price action-based trading, a combination of the 15-minute and 30-minute time frames proves to be highly effective.

Munihisa Homma was a Japanese rice trader who lived in the city of Sakata between the years 1725 and 1803. He was born into a prominent family of rice merchants who had already acquired a significant amount of wealth by the time Homma was born.

Indicators don't provide signals.

They don't tell you when to buy or when to sell. They don't even tell you when something is overbought or oversold.

What Are Some Limitations of Using Price Action? Price action is often subjective, and different traders may interpret the same chart or price history differently, leading to different decisions. Another limitation of price action trading is that past price action is not always a valid predictor of future outcomes.

MACD is a trend-following momentum indicator that shows the relationship between two moving averages of a security's price. Traders use the MACD to identify entry and exit points for trades.

Why SMC is important in Forex trading. Smart money trading uses some of the most effective and time-tested techniques to gain valuable insights. Retail traders have been using price action technical analysis for decades, and ultimately no matter the terminology SMC uses, it is essentially a one in the same.

The choice of timeframe in SMC trading should align with the trader's goals and strategy. Short-term traders may prefer 1-hour or 4-hour charts for quicker insights, while long-term traders might opt for daily or weekly charts to capture broader market trends influenced by institutional movements.

Price action trading is better suited for short- to medium-term, limited-profit trades instead of long-term investments. Most traders believe that the market follows a random pattern and that there is no clear, systematic way to define a strategy that will always work.

Smart money is cash invested or wagered by those considered experienced, well informed, “in the know,” or all three. There is little empirical evidence to support the notion that smart-money investments perform better than non-smart-money investments; however, such influxes of cash influence many speculation methods.