Are Indicators Worthless?

[ZurichTrader]

Says someone thought the neckline was a really good place to buy and take money from people who blindly follow H&S or it could be a news story/sector gain/outstanding company performance that dragged up the index.

Million things it could have been. I'd suggest you learn about the psychology/sentiment behind the patterns before just jumping in but then again I'm not profitable

This is a very important point regarding psychology and sentiment behind price patterns! In my own trading I only ever trade the failure of any classic charting pattern. Anyone that gets the point above will know why.

 

[ZurichTrader]

At the beginning of this thread there were comments about the brokers making all these tools available because they "know they don't work" or something to that effect. My immediate response to this is an observation: the last time I checked, brokers make their comission on your trades whether you win or lose. Winners pay commission, losers pay commission. The longer you win, the longer you are a client paying commission and the longer your broker makes money. The platform provider's decision is a simple one - which tools and indicators are most in demand and will offer me the best chance of winning the most clients.

Anyone who has waited for a specific tool to be integrated in their provider's software will be familiar with this - especially if they were in a small group of client's calling for it!

 

[cuotes]

I assume they offer the widest range of tools/indicators in order to get clients AND other reason...

Let's say that you're not a pro. If you have tons of tools, chances are that you're trading more often. And therefore generate more comms. Win or loss, no matter.

Anyway, some brokers (non-DMA CFDs , spreadbetting...) profit more from your losses than your winners.

 

[bnaimy]

An indicator is nothing but a tool, its have you use the tool that matters.

But only being dependent on indicators is a 100% way to the poorhouse, you have to combinte indicators with S/R and you will then do much better.

Regards
Bashir N

 

[james1989]

In response to the original question.

Yes, they are, especially for the amount of time and maybe money a newbie will spend thinking they have the holy grail......

 

[JL1929]

Surely any indicator will be right some of the time? Isn't the problem finding what time that is?

 

[pssonice]

Indicators based on averages "Are Worthless Indicators" !

.

 

[Straddle8]

There's a lot of guff on this thread. Here is my two cents worth -

1. The opinion has been stated that indicators must be worthless because you can get them for free; why would anyone let you know what they were for free if they worked? I suggest you read "Way of the Turtle" by Curtis Faith. In it, he details how a class of 20 students were taught a precise way to trade, which was unambiguous and unequivocal. When let loose in the markets, only 20-50 pct of these students actually followed the very clear rules given them, which would have made them a fortune. In other words, you could tell 1,000 people a profitable trading strategy for free and the majority would just ignore it anyway.

One of the best books on trading with a strategy. Their success was imo mostly due to their money management:

- cut losers as soon as possible
- hold winners until the trend reverses, not sooner
- increase position size if you're winning, decrease position size if you're losing
- trade uncorrelated commidities
- eliminate emotions/instinct from your trading and just follow the system

 

[Straddle8]

If the approach to trading is purely fundamental, how does one test or know if the approach is valid other than through actual trading? This is one of the huge benefits of a technical or mechanical approach... one can devise a set of rules which can be back-tested, thereby giving the user some level of comfort that it may work. That for me is the big plus in using technicals.

Using a benchmark can help. E.g. you could compare your yearly (or monthly) results with those from the S&P500.

I originally started trading using fundamentals (I'm an FX trader) but it just doesn't work. For example, if you had told me that a global credit crunch would destroy the Japanese economy more than other major countries and make Japan a net importer (yes, unbelievable but true), my instinct would not lead me to think the JPY would then become the strongest currency in the world.

I trade mainly technically now. I can't possibly know what is driving the market in the short term, but if one can tune in to the rhythm of the market, the aim is to ride trends and capture 20-50 pct of the move. Right now there is sufficient volatility, even during these "quiet" summer months.

I'm a stock trader and went the other way. I started with basic technical analysis on large cap stocks and became irritated with the variation in my results. Almost every backtest I did increased my belief the stock market is random. Now I'm using fundamental analysis. The results aren't that explosive, but at least the returns are more consistent.

 

[prabuinet]

a better question would be "Are Indicators worthless for Intraday trading?"

Only in intraday trading it seems to be worthless.
For position/long term it should be worthy to use Indicators.

I believe all Indicators are Invented with long term trading in mind. Whichever book you may take and see the charts.. its visible.

 

[J Magoo]

a better question would be "Are Indicators worthless for Intraday trading?"

Only in intraday trading it seems to be worthless.
For position/long term it should be worthy to use Indicators.

I believe all Indicators are Invented with long term trading in mind. Whichever book you may take and see the charts.. its visible.

I would agree with this. I trade on a trading floor primarily full of very short-term traders. None of them use indicators whatsoever and neither do I. We all use Technical analysis in it's most basic form (supp./Resist/trendlines etc) combined with reading the order book.

However, there are a few guys who are long-term traders here. I also know a few guys at in various hedge funds who are long-term and they all use indicators in some form for their trading.

In conclusion, I think some indicators can be effective, if you are trading in the long-term and, you aren't relying on them solely to make money. There is no holy grail. Embrace the uncertainty of trading and get stuck in.

 

[dominationFX]

Ignore indicators. Understand Econ. fundamentals, crowd psychology and Price Action with volume. End of. Thankyou.....

I have tried for years to find a way to make consistent money using indicators.
I have not had ANY luck and have come to the conclusion that they are only accurate 50% of the time.
No better than flipping a coin.
Using many indicators seems not to solve the problem, since each one is only 50%; therefore using many indicators does nothing.

Also, if these indicators worked, there is NO WAY that their creators would make them available to the public.

I have had much better success using price action only.

If you have found a way to make consistent money using indicators, the more power to you.

Has anyone found a way to make consistent money using indicators?

I don't care which ones that you use; I am just curious if anyone has found a way to make consistent profits by using them.

What are your thoughts?


-Take Whichever Way Works-
Bruce Lee
Jeet Kon Do

 

[Jason101]

For me indicators are not worthless and can be used to flag up a potential action, but only as a spot light, to say hey look over here something interesting may be happening. I am using indicators as a visual short cut whilst scanning through many charts. Once this has been pointed out then it is time to analyse with price action and or news, fundy etc.
But I firmly believe this is right for me and that there is a multitude of rights for other people, contradicting all posts in this thread but right for the individual trader.

 

[er2wizard]

Indicators are TOTALLY worthless IF you keep looking for the "Holy Grail". When someone has a bad streak in trading, the first thing they blame is the indicators and search for alternates. If you find an indicator you like, get intimate with it. Love it, pet it, cherish it, learn its language with it's different moods. Correlating it between the various time frames to understand it's personality at all levels is most essential I've discovered.. After all it couldn't be me it must be my indicators.

 

[lbranjord]

ATR is the best indicator, much like Packers are the best NFL team. Not an opinion, but actual fact.

 

[mrsoul]

ATR is the best indicator, much like Packers are the best NFL team. Not an opinion, but actual fact.

How do you use ATR to make money?

I have looked at the indicator up, down, and sideways and all I can find is an average true range.

What's your idea?

 

[lbranjord]

I don't take signals on it, I use it to set my stop loss and Target profit values. usually I'll use the ATR(21) value from the 1hr chart for a stop loss and the ATR(21) value from a 4hr or daily chart for a target.

If it's a long term system that may change from 4hr to daily ATR. Whatever the case. Smart Money Management can make all the difference. Really how you trade comes down to this.

 

[wackypete2]

ATR is the best indicator, much like Packers are the best NFL team. Not an opinion, but actual fact.

err.. BUY when the Packers win, SELL when they lose??

I'd rather take my cues from the Eagles and their hometown fans....BUY when the fans love them, SELL when the fans hate them. --- Should produce hundreds of trades per day!

Peter

 

[God Of Pips]

I started out trading FX on MT4 platform and my basics was from Babypips. At one time I had so many indicators for the same pair that i couldnt see the actual chart no more. All flashing and blinking. Good fun.

1. As a lot of members have mentioned, you are not going to find the holy grail with a combination of two, three or more pairs of indicators and hope to profit from its signal each and every time.

2. The other issue with technical indicators is they seem to work better on higher TFs, which coincidentally also means that if u take a trade on a higher TF and its a false signal, look forward to loosing big. That pretty much rules out indicators for those who start with real small micro accounts.

3. A combination of indicators and its trading entry or even exit setup can work marvelously when its being tested. Then we proceed to apply it on real trades and it might work initially but then all of a sudden it consistently gives u entries that causes u to loose money. Why?. The market conditions has changed. One TF just needs to have one or two large candles in a series and our indicators indication has just took a beating.

4. All indicators are statistical. That means two things.
A. The signal or output is always lagging behind the current price movement.
B. Indicators show what has happened. There are no guarantees that a pattern will repeat itself
again. In most cases it wont. So it is showing what has happened but it cannot tell us what is
going to happen next.

With all that being said it doesnt mean that there are no traders out there benefiting or making profits with their respective indicator combination.

We just have to remember, reading them and picking entries based on what they show is not as simple and straight forward as it is portrayed. Especially if the set up is a combination of a few indicators.

Finally the probability of a signal turning out to be a false signal is quite high and it takes trading experience to make the call on whether to take the entry or to skip.