Trading Price Action Vs. Indicators

Traders all over the globe have been battling over the proper way to day trade. Trading Price action or price action trading as it's called is taking precedence when compared to following Indicators on a chart. What's better? What works? What makes the most profit? Let us compare the two methods of trading and come to a conclusion to which trading style comes out on top. Let us digest the question that most serious trades come to realize. Which method works better, price action or indicators?

Price Action as explained and taught by Day Trade To Win is a method of trading where price is used as the primary tool for determining risk and reward in real-time. In terms of online day trading, price action is the price movement displayed on the chart, and nothing more. The price as displayed and plotted on the chart real time can provide traders everything they need. The 5 minute chart seems to be the most popular. Inherently, price action is a singular method of trading, requiring no external trading tools (like indicators), plug-ins, or other third-party software for charting purposes. All that is required is an understanding of the market, and a set of rules for interacting with price and the ability to identify price behavior. Sounds simple enough, right? Well not so fast. The interpretation of the price is what makes or breaks price action trading. Without the proper understanding, education, and specific rules, the chart looks nothing more than random bars. Having the key to decipher the code is what price action is all about. Few traders have passed on this method of trading to others in detail and deciphering this code is not easy.

Adversely, indicators are third-party extensions that summarize data, advising traders when and how to trade. Indicators exist for nearly every aspect of day trading for nearly every software platform that supports them. For example, NinjaTrader's indicator list includes indicators ranging from Bollinger Bands to oscillators, moving averages, volume averages, stochastics, and everything in between. Indicators that focus on price action do not exist for the most part, with the exception of those offered at price action exclusive websites. This exception is a stretch, as software like the Atlas Line Indicator is really a price guide; indicating what type of trade to take (long or short) only if price confirms the action. In order for an indicator to be considered compatible with price action, the indicator must:


Operate and produce signals in real-time not after the fact.

Be compatible with price as it moves on the chart

Produce non-conflicting signals that whipsaw a trader


Indicators look pretty and have lots of colors. The question is do they really help, or do they create dependency for traders? Let's first understand what an indicator does.

A trading indicator needs price to first to make a move up or down.
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Once this move is made the Indicator takes what just occurred and plots a point - line - bar - graph on the chart. The indicator by definition is already late in providing information to a trader about a move up or down in the market which has already occurred. Indicators also have another huge issue which traders fail to realize. Which parameter is right for the market being traded? What has worked in the past, will most likely not work in the future. If the indicator in question has been optimized with historical data, then how will history relate to the forward looking performance when traded? This becomes the issue at hand.

At the moment it seems price action has the advantage with the comparisons made. This is just "Round 1" and the following articles will provide more info, but for now let's understand what each contestant stands for and what each brings to the table.

Price action trading:


Is free - a trader does not need to extra software. Candles, bars, dots or any other chart price symbol will provide ample information for price action traders.

Can be used on any market at any time under any circumstances (E-Mini S only certain markets and / or trading software may be supported.

Subject to the law of overuse - the more traders that use an indicator, the more a market will adapt "in retaliation" to its overuse, thus rendering it ineffective. Price action is free from such boundaries as it is based on watching the resulting changes in price.

Easy to use, and follow. A no-brainer, nothing to think about and only following the signals is needed.


While Price Action trading may be free, it may take a trader quite a while of practice (and a few losses) to determine what works. The logical next step in preventing losses is pursuing a form of day trading education. Indicators are a dime a dozen and most focus on following the heard. Beginner to advanced educational programs are available and some even feature "Private Mentorship", a one-on-one trading from an experienced price action traders. Some program includes exact instructions on scalping methods, filtering trades, trading the news, and much more. Six weeks of live tutoring at the student's own pace is much more effective in creating a self-sufficient day trader than any combination of indicators. Stay tuned for what happens next in "Round 2" of Price Action vs Indicators.