I agree that indicators can help a trader in many ways. Whatever works for you great! But still indicators are a derivative of price.
Here is an excerpt from an interview of Linda Raschke Bradford:
AT: Even though you emphasize the primary role of price action, you still seem to use indicators in certain roles.
LBR: You have to put indicators in context. They're background information -
never the primary reason for a trade. That said, you can indicators to objectively scan and rank things... Indicators allow you to see something very quickly. My eye can see a rally in an oscillator, price resistance at the moving average and a little bear flag. If I just look at a plain bar chart, I can't put the price action into context as fast. Indicators can help you process the informtion a little more quickly.
AT: But something like that still won't be as objective or mechanical as something like the wide-range bar scenario, which has a defiable probability associated with it right?
LBR: Asbolutely. If is easier to quantify patterns with range functions that it is with indicators, which are derivatives of price...etc
I would attach the article in a .pdf format but I can not seem to find an attachment function for this message box? Maybe someone can help me out here.
Getting back to some charts. Here is an example of why the quote made by Linda Raschke "You have to put indicators in context. They're background information -
never the primary reason for a trade" stands true. A trader who is fairly good with price action, volume analysis, and tape does not require any indicator. This is not to say indicators are bad. But trading can be done without them. The old timers, Jesse Livermore, Wyckoff, Humprhey Neill... was never exposed to any indicators. Buying/selling was done through the study of price action and patterns (which has now become modern day technical analysis) If those guys were able to do it... there is no reason why modern traders can not rely on the same information.
Below is a daily chart of the mini-sized Dow contract. As you can see, we are still in a magnificent bull run. However, both the MACD and RSI is indicating a sell signal throughout the rally. Price is king.
Now is market profile and indicator? Well yes and no. Market profile is an interesting concept to understand the markets. It requires creativity if you apply it in your trading. Market profile makes a trader think on its own. It does not generate buy or sell signal. Once you understand it, you will see that it is only a simply study of auction theory. Supply vs demand. Balance vs imbalance. Long term buyers/sellers vs short term buyers/sellers. I do not use market profile by the book. What I have done is studied market profile and applied the concepts to it in my trading. I use the auction theory to see if the markets are in value or outside of it. Once again, it comes down to the basic questions: "What is the market trying to do now?"
It is ackward to say whether market profile works or doesnt work. Because there is no such thing... it is not a system. If you follow each textbook instruction on what to do with market profile, it may not work according to the market. But if you have taken the concept of market profile and have applied it your trading, I truly believe a traders market understanding will increase 3folds.
Textbook MP will say that once value high as been broke, it will become support. And once value low is broken it will become resistance. True and false. If you follow these rules blindly you will be frustrated at the amount of times price leaves value and then travels back in. A trader needs to understand whether the break of value was on good volume, good tape, etc... Here is an example of how I like to use market profile concepts in my trading.
In the chart below, the green dotted lines represent both the value high and value low pivot (VAH and VAL). now on Feb. 6, price opens up above value and rallies to test near the previous day high. The markets love to test these extremes to test for demand and supply. The rally to the test of the previous day high was met by supply. Hence price reverses and is pushed back into value. The textbook rule of VAH become support would of not worked here. Why? Previous day high/low are favorite levels by professional traders. Unless we are seeing significant buying/selling pressure there is a bigger probability that price will not travel beyond these two points. If they do, we have a potential trend day. So professionals often like to fade these levels.
Now as you can see price then fell inside value and broke below VAL. It went on to test the previous days low to test supply and demand. It was met with demand and price went on to rally to close above the previous day high. (notice the sentiment change at the close) The textbook play of shorting VAL would of only worked on the first retracement back to VAL. After all the selling was absorbed (notice the volume spike with red volume delta at 12:00) price reversed.
So how do I play these? I personally have rules when the previous day high and low is right above/below the value area. I always look at the high and low instead of playing the value pivots. Some of you may be familiar with the 80% rule as well. (this is just the name of the setup.) When price lifts above/below value but falls within, there is a good chance price will test the other extreme value pivot. Some traders use this rule to play these setups.
Happy trading