Can Indicators Based Only on the Price be Profitable?
There are a number of traders, who trade with a “naked” chart, and some of them are really good at it – they trade by “gut”.
By the way, how does the “gut” work? This is nothing but the result of processing the price chart by our brain. We play all similar situations over in our heads and at some point realize that we’ve already seen it somewhere and the price will more likely go in such direction.
Conclusion: the price chart does have regularities, but only our brain is able to process them. Unfortunately, the formula for these regularities cannot be derived, so developing a profitable indicator based on the price is an impossible task as well.
On the other hand, the price moves depending on the balance of power of buyers and sellers, but not on how the chart looks like. In other words, we can see the same patterns (or models) on the chart, but their results are different due to the different balance of power.
Any kind of stock information works much better than chart analysis (price action).