Indicators

Just wanna ask what are indicators? and what are the best indicators to use in trading?

I would appreciate all your insights about this..

Thank you..

I wouldn't be able to define it but this is a good read:
Technical analysis - Traderpedia

Also, most popular ones seem to be: stochastics, moving averages (exponential and simple), MACD, RSI.

shadowninja said:

I wouldn't be able to define it but this is a good read:
Technical analysis - Traderpedia

Also, most popular ones seem to be: stochastics, moving averages (exponential and simple), MACD, RSI.

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Okay.. Thanks for the link! It would be useful to gain more knowledge..

Anyway, I am reading those populars ones that you mentioned above in a site where i am currently studying my lessons.. So, among those popular ones, what could be the best indicator that would suit most especially to a total beginner like me?

Thanks!

what could be the best indicator that would suit most especially to a total beginner like me?

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This is almost impossible to answer because it will depend on the market that you are interested in trading. Everyone uses different indicators and if there were just one that was best then everyone would use it.

If you are able to it would be good to observe how prices move in the market that you have an interest in.


Paul

Trader333 said:

This is almost impossible to answer because it will depend on the market that you are interested in trading. Everyone uses different indicators and if there were just one that was best then everyone would use it.

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Okay, i see.. Well, i read something that Each indicator has its imperfections. This is why traders combine many different indicators to “screen” each other. As you progress through your trading career, you will learn which indicators you like the best and can combine them in a way that fits your trading style.

So thanks for your insights.. I do get you on that..

pips_lady said:

Just wanna ask what are indicators? and what are the best indicators to use in trading?

I would appreciate all your insights about this..

Thank you..

Click to expand...

you may find that once you have gone through the process of looking at every indicator, (and each has its uses, and looks useful in hindsight), you will end up trying to work with as few as possible.
the other thing is not to use too many indicators, and dont fall into the trap of misleading yourself by thinking that having lots "confirms" a signal, when in fact its the same information in a different form. this is called multi-colinearity. it was the insight that helped me to cut back on indicators.

Multicollinearity - StockCharts.com

(I have posted this link before, but I think it is worth you reading it)
hope that helps.

Yes, there are basically two types of indicator. Ones based on moving averages and ones that aren't (I can't remember the term used. Go, me! :cheesy: ). MACD vs Stochastics, for instance.

I read somewhere that at the most you need 5 or 6. And then you need to tweak them to suit your trading style.

Different indicators of course do different things so as someone stated above it depends on what your trading style is.

If you are going to use indicators i would suggest the following:

1. Something to measure trend....price action peak and trough analysis is best for this, although you can use some Ma crosses for confirmation I guess.

2. Something to measure momentum...oscillator (s)

3. Something to gauage volatility bol bands/ma envelopes/channels etc..

4. Support/resistance. Sensible again to look at peak trough chart analysis for this as well as fibs t/lines and look for the clusters.

Then of course there's the most perfect indicator of all...price, learn about individual candles as well as overall price action..trends/congestion/ranges/time frames etc..

The point made above about collinearity is very valid.

Good luck.

"Momentum". That's the word!

bbmac said:

Then of course there's the most perfect indicator of all...price, learn about individual candles as well as overall price action..trends/congestion/ranges/time frames etc..

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Super advice. And dont forget the line chart too. Toggle between them. Candles, lines. Lines, candles. Study a price chart and then write an essay about what you see (add in some sketches if you like). Then do another one tommorow.

The picture into words.

All in my opinion, of course.

tune

trendie said:

Multicollinearity - StockCharts.com

Click to expand...

Thank you for the insight you shared and for the link

shadowninja said:

"Momentum". That's the word!

Click to expand...

oh aright!

Oscillators/Leading Indicators and Momentum/Lagging Indicators..

Thanks!

Brief description of indicator : Indicator

The main variables for the mathematical expression of an indicator are opening price, closing price, highest price, lowest price, all measured at a specific time frame. Volume is also being widely used. There are other minor variables used in some indicators.

If you are able to correlate the variables ( probably with some mathematical differentiation, integration, constants, coefficient, ... etc. ) and produce a prospective display to indicate the price movement, you make your own indicator.
There are over one hundred indicators developed by different people just to indicate the price movement.

Candlestick and bar charts are the most basis/raw form of indicator, which directly display price without going through mathematical calculation.

If anybody agree with me: Price itself is the perfect indicator.