Price Action Trading versus Indicator Strategy

Two different types of trading strategies and their uses & benefits.

Price Action Chart with Trading Indicators.

Only expert traders know about the secrets

Price Action traders and indicator traders will make all of their trading decisions using a price chart, and they will both determine which direction the market is likely to move in using just the market price. The big difference between the two is in the way they both analyze the data to make predictions.

Price Action traders always say Price Action Trading is better because it doesn’t lag behind the market's action, whereas Indicator traders state that trading with indicators is simpler than trading with price action because you only have to learn what the indicator is showing you in order to use it, you don’t have to learn about lots of additional things like candlestick chart patterns, support and resistance levels, trend lines, etc.

Price Action traders will typically tend to analyze the current market price with the past market price to figure out which direction the market is likely to move in. Whereas, indicator traders will only analyze the past market price to try to find out where the market is going to move. All indicators are derived from past market prices, which essentially means the indicator traders are trying to predict the future using only the past. Price Action traders do this too but with one very important difference, they are trying to predict the future by combining what happened in the past with what’s happening in the present.

A typical Price Action Trading Strategy will be one where the Price Action trader will determine a level in the market that’s formed based on the past price history, and then watch the price to see what happens when the market returns to the old level. If the market comes back to the level and produces a Price Action Pattern the trader knows of, he could see that as being a sign the market wants to reverse and move away from the level, in which case he may enter a trade to try to make some profit from the reversal or breakout.

Now the main difference with indicator traders is they make all of their decisions on things that have happened in the past, they don’t combine the past with the present like Price Action traders do, they just use the past. This is how most Price Action traders trade, they either use the past combined with the present to make their trading decisions or they just base their decisions solely on what’s happening in the present.

Price Action is a highly accurate trading strategy as compared to Indicator. Both are suitable for Swing, Intraday and Positional time frames. It mainly depends on the trader's choice.

Price Action is mainly based on automatic trend line patterns, support-resistance triangular breakout, candlesticks patterns, volume analysis and many other technical logics, while indicators work only based on their parameter, average price value of previously plotted data and mathematical formulas.

Price Action trading setup is based on a manual process, while indicator strategy is based on fully automated mechanical functions by predefined mathematical formulas.

Price Action supports any time frame to get the optimised result, but the trading indicator considers only a few suitable time frames for the best output.

Price Action trading follows different types of break-out patterns like Descending Triangle chart patterns, Ascending Triangle chart patterns, Symmetrical Triangle chart patterns, Open-Range Break-Out patterns and Trend line extensions, etc. But the Trading indicator has nothing like these.

In presenting the Price Action method, amazing features of volume pressures define entry and exit at the reversal swing high and low. In another way, the indicator depends on the Average price movement of a specific time range.

The Price Action Trading concept gives you a clear view to analyze the market sentiment compared to trading indicators.

The Price Action method includes a core level filtration to prevent false breakouts using volume analysis techniques, while the Trading indicator lacks this filtering process.

Some traders find that using indicators can make charts appear messy and cluttered, preferring to focus solely on price action. The overuse of indicators can lead to confusion due to conflicting signals.

Price action and Technical indicators can both be quantified, backtested, and used as trading signals. So whichever one you can use both for technical analysis. Price Action or Technical indicators are usually much better strategies than trading analysis based on your own or others’ opinions. Nowadays Price Action Trading is trendier than only Indicators.

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