Indicators vs price action

Which is better? Characteristic of each approach. Maybe we need both?

5/3/20231 min read

Indicators or Price Action?

There are hundreds of (technical) indicators you can use to help you find entry and exit points. All these are calculated on past data so they are lagging. The picture on the right shows a chart with 3 Bollinger Band indicators.

Price action is the evaluation of current price level with past (resistance and support) levels, so it is less lagging compared to using technical indicators. The picture on the right show the same price chart but with some price levels which are important to define price action. Some traders use candle stick pattern to decide entry and/or exit points. If using this only, we focus only on the "current" price movement but we miss the bigger picture like resistance and support levels.

All the above are true if we use only one time frame to evaluate and predict the direction of the market.

But we have many different time frames (TFs) and they spread from very long term, like weekly or monthly chart, to very small ones like 5 minutes or even 1 minute charts. This will need another post.

For now, we can see that we need to combine both indicators and price action to help us in predicting the next price move. The picture on the right shows both indicators and key price levels, or we can say both indicators and price action are used.