What indicators do you look for most?

This is a discussion on What indicators do you look for most? within the Swing & Position Trading forums, part of the Methods category; Originally Posted by timsk Hi David, As you've stated in other posts that you're new to trading - please allow ...

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Old Apr 29, 2015, 1:13pm   #17
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Originally Posted by timsk View Post
Hi David,
As you've stated in other posts that you're new to trading - please allow me to offer a small tip that will stand you in good stead along your journey. . .

Don't make assumptions based on logic or accept blindly what you read - regardless of the source. You have to test everything for yourself and arrive at your own conclusions. Your statement above is absolutely fine if you've tested all indicators and found that for you personally none of them offer any predictive qualities. By the same token, if you're only interested in indicators that predict and nothing else then, based on said research, you can conclude they're all useless. Unless and until you've done that, I recommend you keep an open mind, especially as some indicators are classed as predictive. And, as I say, just because you might conclude all indicators are useless, it doesn't mean that all other traders will reach the same conclusion. Indeed, I can assure you they won't - and don't!

Tim.
Hi Tim
what indiarers predict the future then? I am being polite I do mean it
Thank you

Last edited by jonisonvespa; Apr 29, 2015 at 1:22pm.
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Old Apr 29, 2015, 1:47pm   #18
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The best indicator is when you have client X indicating willingness to sell at 100 and client Y indicating a willingness to buy at 101, and both in unlimited size if ya want icing on it.
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Old Apr 29, 2015, 1:50pm   #19
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Hi Tim
what indiarers predict the future then?
Hi jonisonvespa,
In general terms, indicators fall into two main groups: leading and lagging. The former work best in range bound markets and the latter work best in trending markets. Examples of lagging indicators are things like moving averages and MACD. By contrast, many oscillators are classed as leading indicators because they indicate when a market is overbought or oversold, enabling traders to 'predict' what it is likely to do next. Well know examples are stochastics and RSI. Potentially, they offer greater rewards, but that comes at the expense of increased risk. For example, in a market that's trending strongly (upwards), leading indicators will generate overbought signals, tempting traders to exit long positions prematurely and/or to enter short positions in an attempt to catch the market near its high.

One indicator that sort of bridges the gap between leading and lagging is Bollinger bands. Lots of traders regard price breaching the upper band as an indication that it's overbought and look to close their longs and/or to go short, while John Bollinger himself recommended 'riding the bands' and considered the breach of the upper band as an indication of a strong trend.

All the above is just standard text book stuff which I'm pretty much quoting from Steven B. Achelis' highly regarded book Technical Analysis from A to Z. IMO, it isn't of much help or interest to individual traders. As per my post to David, what matters is that each trader does their own research to find what indicators - if any - 'work' (whatever work means for them) and whether or not they offer any predictive qualities. Needless to say, what works for one trader may not work for the next.
Tim.
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Old Apr 29, 2015, 2:05pm   #20
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timsk, all indicators are lagging in that they can only ever work on data that is already in the market domain. The 'predictive' bit is purely and only ever in traders' heads. Your example about OB/OS is a case in point. One trader will likely sell or go short as soon as it hits OB while another will wait for it to fall below a lower level 'for confirmation' before selling. They both will be working with the exact same data. And they can both just as easily be wrong. Stuff can stay OB for a long, long time and switch back up to OB just after hitting a lower level on any of the oscillator indicators. There is a fascination with indicators out of all proportion to their actual worth. They can, sometimes, provide a useful general guide, but to be timing entries and exits on them alone is folly in my view.
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Old Apr 29, 2015, 2:17pm   #21
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Hi Pat,
Just to be clear, all the points I've made about 'leading' and 'lagging' indicators do not reflect my personal views or those of T2W; I'm merely explaining the basic premise on which most indicators are based - as discussed in major texts on the topic - of which I referenced one.

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. . .The 'predictive' bit is purely and only ever in traders' heads.
That key point is one I stressed in both my last two posts - but thanks for making it again Pat as it can't be emphasised enough, IMO.
Tim.
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Old Apr 29, 2015, 2:29pm   #22
 
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Originally Posted by jonisonvespa View Post
Hi Tim
what indiarers predict the future then? I am being polite I do mean it
Thank you
The best indicators will develop in your own mind over time.

I strongly advise you learn how to read into inducements & traps, these will become part of your strategy. You will not learn about them in books, nor on this forum, or online, you may read about them but you will only learn about them with live chart time/live trades.

Most indicators are stabilizers while learning to justify why the price went here, why the price went there. They are slowly stripped away to reveal what is really going on, which is mostly avoiding inducement/traps, seeing traps & taking a position to be carried on the momentum of the move.

Scalping skills are required for this to avoid using large stops & potential drawdown.

If you are looking to trade very infrequently & maybe that is what the OP mean't in the opening post about "intelligent investing", all investing is gambling to some degree, it will be very prudent to realise & admit this to yourself, Especially with a question like "which indicator predicts the future" from Jonisonvespa, which is a very fair question if you are starting out.

As a day trader(speculator/gambler) I am only interested in the future of the now, indicators are of no use to me anymore, but I am very glad to have learned to use them.

Good luck

Last edited by tokyojoe; Apr 29, 2015 at 2:49pm. Reason: typo
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Old May 5, 2015, 3:02am   #23
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NH538DB8 started this thread
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Originally Posted by tokyojoe View Post
The best indicators will develop in your own mind over time.

I strongly advise you learn how to read into inducements & traps, these will become part of your strategy. You will not learn about them in books, nor on this forum, or online, you may read about them but you will only learn about them with live chart time/live trades.

Most indicators are stabilizers while learning to justify why the price went here, why the price went there. They are slowly stripped away to reveal what is really going on, which is mostly avoiding inducement/traps, seeing traps & taking a position to be carried on the momentum of the move.

Scalping skills are required for this to avoid using large stops & potential drawdown.

If you are looking to trade very infrequently & maybe that is what the OP mean't in the opening post about "intelligent investing", all investing is gambling to some degree, it will be very prudent to realise & admit this to yourself, Especially with a question like "which indicator predicts the future" from Jonisonvespa, which is a very fair question if you are starting out.

As a day trader(speculator/gambler) I am only interested in the future of the now, indicators are of no use to me anymore, but I am very glad to have learned to use them.

Good luck
Thank you all for your input on what really is a very vauge and poorly phrased question.

I will say that I believe there is nothing (indicator, price pattern, etc) that can predict the direction that a price will go at any given time. There are lots of things that will give you information that you can use to extrapolate an "educated" opinion of where the market will go given past performance and trends.

As the OP I can clarify Tokyojoe's question about trading frequency for ME. I have no problem trading on a day to day basis. Day trading is not an option as I have a day job (for now). So I think I would be considered willing to be an active trader as opposed to a day trader.

I've spent a lot of time since I started this thread researching price action patterns and the like. Seems like I've scratched the surface of a whole new world of stock trading strategies.

I will say the MOST important thing I've learned from this thread and all the information that its lead to is the necessity for back testing, forward testing, and thoroughly evaluating a strategy that is going to be used. In the past couple weeks I've spent countless hours developing criteria for what in my mind (reinforced by the interwebs) will be a winning strategy and then seeing it fall apart under testing. If you can't test a theory before putting it into action in the market then its a gamble. If you can't test it objectively and have it be profitable in testing then there is no way it will be profitable in real life other than plain dumb luck (gambling).
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