All Newbies: The only indicator you'll ever need

[Vaco]

Indicators draw a line in the sand, a point to become active they help build dicipline and structure to peoples trading.

Agreed not all use them and you can draw your own lines or if your very special you will not even need a chart, you will trade off the tape.

Should we all abandon charts and just trade from reading the tape of the market we love?

 

[tommac]

ok --first post in forums- don`t take too seriously , only a POV. - I used to be a Forex trader for a bank , many moons ago. We didn`t have PC`s let alone charting software and hey we made good money by learning "our " market inside out.
It didn`t happen overnight and not every trade was successful but it worked for us --But we each had one pair to trade only day in day out. I now trade from home and get more deals right using my bonce rather than when I use a lot of TA and it goes t*** up. Hey ho.

 

[Lee Shepherd]

tommac,

You sound like an old hand at this game.

If so, you'll admit that even before PC's and charting software, indicators including MA's have been around since the 1930's when before computers, indicators ect where done by hand. They are still actively done this way to this date when spikes occur in the specified target market to eliminate the (potential but likely) coming false signal, although there are some programs out there that can be selective with pricing in bars.

It's common practice for (new) traders to use an MA (in particular) without actually knowing how it works or how it becomes the signal it provides. This is common when you hear lines like, 'every trade I've taken has been stopped out today' and 'it's like the market knows when I've just placed my trade' and the common one 'it dont work anymore, I'll change it/try something else'. And around it goes.

 

[tommac]

Yes I agree and of course they can be useful . We had a team of analysts in the background doing the clever stuff Plus we never had time in the heat of the action.
I just think a lot of new traders put all their faith in these without thinking it through--i`ve done it myself. I guess there`s no shortcut. Here`s treading carefully!

 

[Rhody Trader]

Yes a delayed price for longer term trading is fine of course; when a market is closed it's not going anywhere!

It's not just for long-term trading. I've actually made intraday and swing trading decisions based on delayed data. The price patterns and support/resistance levels are already established. If you don't have a timeframe that's inside the delay period it can work just fine.

 

[strongboes]

Profitable as secondary source at the moment as I work from home doing something else too. One day will be full time but not in a hurry.

Yes, it's a method that works because it has to work because there is no viable alternative.

Indicators do not work, systems and squiggly lines are useless.

Please remember here the underlying lesson I'm trying to teach: choose just 1 market that works for you and stick with it forever - I think we can all agree on that one.

But I'll say it again, indicators are fun, interesting, addictive and useless.

I have highlighted the parts in bold where I believe you are talking utter ********. I think what your trying to say is, I am not capable of making an indicator work for me, and you sound rather bitter too!

 

[Trader333]

But I'll say it again, indicators are fun, interesting, addictive and useless.

How do you know ?


Paul

 

[fibonelli]

Choose 1 market.
Learn it.
Marry it.
Commit to it.
Watch it.
You will learn when it is due to come up and due to go down.

That, my friends, is as good as it gets.

Hope this helps.

Disagree, see my signature.

 

[jmh0]

I only trade EUR/USD ...

Mate, whatever did you do prior to 1999?

 

[blackcab]

hitman - purely out of interest, do you have a feel for how much of your judgement comes from your market's movements alone, and how much from external factors (of which you may be conscious, unconsciousness or anywhere in between; what's broadly going on in the economy, the weather, local politics, geopolitics...)? I don't believe that's answerable to any great accuracy, but it would be good to get your gut feel for that ratio.

 

[Jaydee]

A good post Himan and I do agree with you as I don't use indicators either. I do use support and resistance (and a few trend lines) but I confirm these with price action + volume.

I used to be an indicator junkie but soon I realised that they held no real substance and could not help improve my trading. However, I still know a lot of traders who use indicators and use them well. Therefore, to me, indicators are useless and always will be as long as I have no faith in them, but for other traders they are an important part of their success. I think confidence in your method is the key here, not necessarily the method itself.

Pros of indicators:
Easy to know when to get in and out (x crosses y means I'm long/short)

Useful to backtest from - I stuggle with backtesting as I can't find a set of indicators which mirror my own conginitve response to the market.

Good to have a knowledge of the favourite indicators because when they fail you can take the opposite side of the failure knowing stops are going to be triggered. I know one trader who trades on short-term stochastic cross failures.

And...er...they look pretty and impress your mates who aren't traders

Cons:
Encourage the newbie to believe that technical analysis holds the key to success by 'predicting' the future and that indicators, somehow, give you and insight ahead of time. Really, they are just showing you what you already see.

Encourage the newbie to focus only on the number of winners to losers ratio, rather than the bigger picture which includes max favourable excursion, opportunities missed, stops, money management, introspect, etc *

Encourage over optimisation for backtesting.

They are increadibly easy to teach and, consequently, they are plugged by charlatans offering courses which have about as much depth as a frying pan.

In short, indicators are useful if you have experience and know the caveats and limitations of them. Sadly, new traders think they are the be all and end all which is where it all goes wrong.



* Just to add to my point above - I once had a discussion with a woman on a forum where she was backtesting Donchian Channels. She was happily dicussing that she had managed to get a 63% win to loss ratio over the last 10 years of test data and she was striving to get this to 75%. I presented her with the idea that this was pure folly (with some simple trading facts) and that she was failing to see the bigger picture, but she wouldn't listen. She had spent so many (completely and utterly wasted) hours coding and changing parameters on this that she would never understand as she needed to believe so badly that this system would make money. This is one of the common pitfalls with Technical analysis and indicators because people will always see and believe what they want and won't be objective about their results (myself included for the first few years).

 

[normbeef]

* Just to add to my point above - I once had a discussion with a woman on a forum where she was backtesting Donchian Channels. She was happily dicussing that she had managed to get a 63% win to loss ratio over the last 10 years of test data and she was striving to get this to 75%. I presented her with the idea that this was pure folly (with some simple trading facts) and that she was failing to see the bigger picture, but she wouldn't listen. She had spent so many (completely and utterly wasted) hours coding and changing parameters on this that she would never understand as she needed to believe so badly that this system would make money. This is one of the common pitfalls with Technical analysis and indicators because people will always see and believe what they want and won't be objective about their results (myself included for the first few years).

Good post... Its my belief that money management is really the key to trading.. forget indicators etc etc etc...

I often smile when I see people trying to get a high percentage score on their win ratio .. surely they are missing the point... I dont care if 99% of my trades loose as long as the 1% win big...

Marrying one market might be a good idea in terms of you will get a better idea about what things apparenlty move the price around.. but nobody can know the future, and too often people who take their knowledge too seriously get caught out...!!

As shadow mentioned earlier in the thread... "how often have you seen a market climb high ... then push on and make higher prices"

Newbies should be looking at how they manage their money in as much detail as possible ...

marry your money and never let her go... ... not the market.. £££££

 

[isalazar]

I married RIMM in NASDAQ

HI:
I have just done that. But I married RIMM. I know everything about it. It has enough volatility on a daily basis to trade options too. I know when big volumes come in. I do feel more comfortable with it than anything else because I know all the gory details of it.
And you are right I know when it is cheap to buy it or too high to get rid of it. However all indicators if you know how to use it they help. A fool with a tool is a fool.
Isabel

To all newbies in trading I can offer the only indicator you will ever need: the realtime price. And the only method you'll ever need: know just 1 market inside out.

If you didn't like that answer, trading real money may not be a great idea until you come round to this way of thinking.

Of course, everyone needs to learn this for themselves - the best education you will ever get is real money losses. Ouch, they hurt don't they? But that will be your coming-of-age if you decide to use moving averages, oscillators, RSI, stochastics, bollinger bands, fib levels, etc... this is all junk. It's all just lagged guesswork that can be right now and again, but mainly is wrong. Ask any experience technical trader and if they search their souls they know this is true. Even a stopped clock tells the right time twice a day. So even a useless indicator like RSI can get it right twice a day - see what I'm saying? You'll win $1000, and lose £100,000.

No magic indicator or system exists, but if you know just 1 market by watching it day after day after day after day for months, watch it move, watch how it twists and turns, just watch. Don't guess it, don't want anything to happen, just watch. When you learn it inside out, as if you're married to it, then you will know when it's too low and when it's too high. That's your indicator: price. You will know when to buy it and when to short it.

Don't draw lines on the chart, forget moving averages, throw away those same old boring indicators that EVERY platform in the world now offers for free. I mean think about it: if everyone has access to them on their platforms in this day and age, do you really think you can win with them consistently whilst others somehow don't? Doesn't make sense does it?

Choose 1 market.
Learn it.
Marry it.
Commit to it.
Watch it.
You will learn when it is due to come up and due to go down.

That, my friends, is as good as it gets.

Hope this helps.