Most Indicators are useless - why does anyone bother with them?

For what its worth, here is my experience of indicators -

I've experimented with most of them and they all suck, except for one ot two.

Why anyone bothers with them, i do not know.

Furthermore, why anyone buys them, from custom programmers is a further mystery. Because as far as i can see 90% of indicators are useless........

Thank god i have never been foolish enough to buy an indicator.

Context, context, context.

If the markets always trended, MAs will always make money.
If markets always ranged, oscillators will always make money.

Its a question of having a broader picture of the state of the market, and placing greater emphasis on one set of indicators than others.

You might as well ask "why does anyone bother using gears on their cars, they are mostly useless", without considering first and second are better in jams and parking at shops, and fourth and fifth are better on motorways.

Context.

Yes, most indicators are useless, but for two reasons that don't mean they should not ever be used. Firstly, a reasonable trader shouldn't need more than one or two on any given market, combined with price action, to make good trades. Secondly, many of them tend to re-package the same evidence but in different language / colours / patterns, so you could have 50 indicators all saying the same thing but 45 of them would indeed be useless if they were a different expression of the same objective inputs.

So why are there so many indicators and new ones being developed all the time?
1. Some traders lack confidence: even second-hand evidence makes them feel better though they may prevaricate so much as to miss the timing on their trades for entry or exit.
2. Vendors of software and training courses can inflate their blurb and fees.

JTrader said:

Why anyone bothers with them, i do not know.

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Hi JT,
I concur with trendie's comments and would add that it depends on what you use indicators for and the burden of expectation you place upon them. If you're looking for a holy grail which allows you to take consistent profits from the market without ever incurring losses then, yes, you're likely to be disappointed. However, if you want an indicator to perform a specific and defined task to aid you in your trading, then there are some useful ones out there. For example, if you want to measure the volatility of an instrument, then ATR is well worth bothering with as it does pretty much what it says on the tin. It's what you then do with the information gleaned from the indicator that really matters. If you misuse it or misinterpret it, that's a reflection of your trading skills and not the usefulness - or otherwise - of the indicator.

Tim.

trendie said:

Context, context, context.

If the markets always trended, MAs will always make money.
If markets always ranged, oscillators will always make money.

Its a question of having a broader picture of the state of the market, and placing greater emphasis on one set of indicators than others.

You might as well ask "why does anyone bother using gears on their cars, they are mostly useless", without considering first and second are better in jams and parking at shops, and fourth and fifth are better on motorways.

Context.

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That;s true 100% true :clap:

timsk said:

Hi JT,
I concur with trendie's comments and would add that it depends on what you use indicators for and the burden of expectation you place upon them. If you're looking for a holy grail which allows you to take consistent profits from the market without ever incurring losses then, yes, you're likely to be disappointed. However, if you want an indicator to perform a specific and defined task to aid you in your trading, then there are some useful ones out there. For example, if you want to measure the volatility of an instrument, then ATR is well worth bothering with as it does pretty much what it says on the tin. It's what you then do with the information gleaned from the indicator that really matters. If you misuse it or misinterpret it, that's a reflection of your trading skills and not the usefulness - or otherwise - of the indicator.

Tim.

Click to expand...

I use them only out of a single reason they help me earning money

JTrader said:

For what its worth, here is my experience of indicators -

I've experimented with most of them and they all suck, except for one ot two.

Why anyone bothers with them, i do not know.

Furthermore, why anyone buys them, from custom programmers is a further mystery. Because as far as i can see 90% of indicators are useless........

Thank god i have never been foolish enough to buy an indicator.

Click to expand...

Like so much in life, its how you use it.
Also, to be less glib, its knowing what the indicator actually is doing and represents and seeing the results in the context of the price graph.

JTrader said:

For what its worth, here is my experience of indicators -

I've experimented with most of them and they all suck, except for one ot two.

Why anyone bothers with them, i do not know.

Furthermore, why anyone buys them, from custom programmers is a further mystery. Because as far as i can see 90% of indicators are useless........

Thank god i have never been foolish enough to buy an indicator.

Click to expand...

I'd say most things people say about trading is useless. I've experimented with most of them and they all suck, except for one or two.

new_trader said:

I'd say most things people say about trading is useless. I've experimented with most of them and they all suck, except for one or two.

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Just one or two are what it takes. It takes years of reading to sort the wheat from the chaff, though, doesn't it?

No successful trader is going to tell what he does on the internet.

Split

Splitlink said:

Just one or two are what it takes. It takes years of reading to sort the wheat from the chaff, though, doesn't it?

No successful trader is going to tell what he does on the internet.

Split

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You are right about, that one or two key techniques are all you need. Some even publish them as they profit from people following them

Yes, I've gone through many indicators and I'm arriving at a similar conclusion.

However, I shall certainly be using a very small number of indicators to "indicate" certain attributes of price action that cannot be seen clearly on a price only chart.

fibonelli said:

Yes, I've gone through many indicators and I'm arriving at a similar conclusion.

However, I shall certainly be using a very small number of indicators to "indicate" certain attributes of price action that cannot be seen clearly on a price only chart.

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Well put.

Indicators are very handy for focussing your attention to something that has happened when you are checking the history of a market to (re)acquainte yourself with it. They don't need to have any predictive power (and here I tend to share the OP's skepticism) to be useful.

Not all indicators are created equal

I find RSI divergence the best (only) indicator signal that is in anyway reliable/predictive etc......

rathcoole_exile said:

I find RSI divergence the best (only) indicator signal that is in anyway reliable/predictive etc......

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I didn't like indicators but admit the usefulness of divergence lines. At present, I'm using MACD. Why do you pefer RSI?

Split

rathcoole_exile said:

I find RSI divergence the best (only) indicator signal that is in anyway reliable/predictive etc......

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Yes, RSI is one of few inds. that i like.
I have never sat down & designed a profitable way of trading RSI hooks in terms of profit-target and stop-loss. Have you? If so, feel free to elaborate.

Cheers.

fibonelli said:

However, I shall certainly be using a very small number of indicators to "indicate" certain attributes of price action that cannot be seen clearly on a price only chart.

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Could you perhaps elaborate on those "attributes" you are refering too?

Most Indicators are useless!

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Im afraid id have to disagree with that! Id have to change the first word to All!:cheesy::clap:

There have been some intelligent responses to this thread so far.

When I read posts like '...most or all indicators don't work/are useless what the authors are really saying is that they haven't found a way to make money through thieir use or for whatever reason prefer not to use them. There was a guy over at forexfactory recently saying it's impossible to make money on the sub 1hr charts and that it's just the amatuers/losers that use them and fibs/trend lines etc... Again what he was saying was that he hadn't found a way of using sub 1hr charts effectively to give him consistent profit.

This distinction is important in itself, particularly for new/inexperienced traders reading this thread.

As an example, I use repeatbale patterns of technical indicators at identifiable areas of supp/res confirmed by individual price action itself within the context of overall price action analysis, and only enter the market at those areas if the tech indicator based patterns are present, so they do work for me, and for the record I do this on the 1min chart as the trigger. It is the confluence of repeatable indicator patterns at supp/res with price action confirmation that gives the edge, and to this extent they are an important part of that confluence.

If i could find just one reliable S/R and pull-back marking indicator, trading would be a doddle.