Choose one indicator, your life depends on it!

[pips-galor888]

Picture this:

You are being held at gun point and forced to trade forex!

You can have just one SINGLE indicator to help in making your buy/sell decisions

Which indicator would YOU use (and how )?

 

[wasp]

Price... by watching it...

 

[pips-galor888]

wasp, based just on price, how would you make a decision on, say, a chart showing nothing but red on all time frames? How long would you wait to decide to enter long/short and what would you base your decision on?

 

[wasp]

lol... 15 years study, summarized in one paragraph... ain't gonna happen!

 

[pips-galor888]

Thanks wasp.

My original question is still open to further suggestions.

 

[tornhill]

stochastic oscillator would be my favourite, combined with price action.

by the way: is there somebody able to do something useful with ichimoku? i get headache when i look at it.

 

[alan5616]

Picture this:

You are being held at gun point and forced to trade forex!

You can have just one SINGLE indicator to help in making your buy/sell decisions

Which indicator would YOU use (and how )?

Price action plus Fractals

 

[rathcoole_exile]

well, we had the first rain of the year yesterday, even though the Rainy Season doesn't start properly until next month.
So, this time of year I always switch to my most prized and reliable indicator - RAIN.
when it's wet go Short, when the rain ceases for a while, go Long.

I'd rather use rain than shyte like Stochastics etc

 

[rathcoole_exile]

stochastic oscillator would be my favourite, combined with price action.

i'm curious about people's obsession with this indicator, especially when it seems the more successful method of trading it is the "Stochastic POP" which trades directly against the direction that most ppeople use Stochs.

I find it the hardest indicator to understand. Could you do me a favour please ?
Can you describe in less than 20 words (without yards of formulas) exactly what this indicator represents, how it is calculated and derived etc ?

that would be most appreciated ....

 

[megamuel]

Stochastic Oscillator

Thats a pretty simple explaination of it. The idea of using this indicator used to appeal to me until I realised you had to learn how to trade to actually make money. If only it were as simple as buying and selling on indicator signals!

 

[nine]

Wasp is fibbing. He uses price + a trend line or two.

I am lazier than he is. I choose price + a moving average or two. Advantage = I don't have to draw the damned thing.


And for an added bonus for RE I'll explain the stochastic. What it really is that is but in a few extra words.

The stochastic is best thought of as measuring how close the current price is to a moving channel. So for a 6,1,1 stoch if price is at the top of the 6 period high to low channel then the reading is 100; at the bottom 0.

Now thats a pretty choppy thing for indicator lovers so it is smoothed (6,3,1 (fast stoch)) and double smoothed (6,3,3 (slow stoch)) which means (because smoothing adds lag) that when price reaches the top of the channel the stoch is still rising and if it went to the top of the 6 bars and then closed there for the next 5 or 6 bars then a 633 stoch would finally reach 100.

Divergence: in the simple 611 stoch then all it tells you is that this new high bar's close isn't as close to the top of the 6 period channel as the last new high's close was to the 6 period channel at that time. So in its simple form it just means the bar closed down a bit. But the trick is that the double smoothing makes it a better indicator for this purpose. Remember I said it took 5 or 6 bars at the top before it finally got to 100, well that effect means that the divergence becomes quite a good measure of smoothed acceleration. So divergence nicely shows reducing price acceleration.


But to be honest. If you can count bars or can see that the first time it got further from the trendline (or in my lazy case, the ma) than it did on the new higher high then you don't need a stoch to know that this time the acceleration of price was lower and thus, the trend might (just might) be about to bend.

 

[rathcoole_exile]

Stochastic Oscillator

Thats a pretty simple explaination of it.

Yes mate I know what it is.
the point I'm trying to make I was trying to make is, can a newbie explain Stochs in a clear, succint manner (without resorting to internet links)?
I seriously doubt it.
They slap it on, trade it, but never really understand what it is, how the data is derived, what the "signals" actually indicate etc.

whereas, a 5 year old could proficiently describe "support" or "resistance", "trendline" etc

so my fundamental question, obscure as it was in my original post, is:
should one really trade something one doesn't fully understand ?

 

[rathcoole_exile]

And for an added bonus for RE I'll explain the stochastic. What it really is that is but in a few extra words.

The stochastic is best thought of as measuring how close the current price is to a moving channel. So for a 6,1,1 stoch if price is at the top of the 6 period high to low channel then the reading is 100; at the bottom 0.

Now thats a pretty choppy thing for indicator lovers so it is smoothed (6,3,1 (fast stoch)) and double smoothed (6,3,3 (slow stoch)) which means (because smoothing adds lag) that when price reaches the top of the channel the stoch is still rising and if it went to the top of the 6 bars and then closed there for the next 5 or 6 bars then a 633 stoch would finally reach 100.

yes mate but what does it all mean ?

if you gave that explanation to a complete newbie and told him to apply this logic and crack on with trading, what is he supposed to do with that information ?

Trade a price reversal ?

what will he say to the guy next to him who is playing the Stochastic "Pop" and going with the Momentum ? They each take the other side of each other's trade.

What's the difference between this and flipping a coin ? What benefit, other than psychological, does a Stochastics indicator provide ?

And what happens when price breaks out of it's ranging channel and the channel data to which the 6.1.1. refers to becomes obsolete or irrelevant ?

 

[everyonerich]

divergence/convergence signifies a change of trend. but usually need to wait for a long time before able to trade this way

 

[Hoggums]

Indicators schmindicators.

 

[wasp]

The stochastic osacilator takes an average price, lays it in a second window and shows, when returning from the oversold/bought areas when price has topped out, or, just one coloured line crosses the other.

Quite simply it is the most important tool anyone can have on their charts as it gives all the answers...

Duh....!

 

[nine]

The real issue is that Newbies don't have a good model of the market in their minds. So in the absence of understanding, things like stochs are used to try to generate signals.

I think thats the reason that market profile appeals to a lot of mid-life traders. They start to know what they don't know and the find in MP some of the answers they were looking for ... and then they discover that its hard to turn MP into a tradable edge.

So the next step is that they start looking for secret information from volume - so you even get people like Soultrader attracted to some of the bs people spout about interpreting extra information from volume (and hence you get all the different types of charts).

There is this never ending source of holy grails.

If you haven't guessed I find all this frustrating which is probably why I haven't been posting here much recently. Real trading is kind of boring, steeped in uncertainty (because you simply don't know what will happen next), and a little hard to do really well.

OK. Rant over. And out.

Do you like my crocodile? It symbolizes trading - lurking in the stochastic darkness stalking an unwary meal

yes mate but what does it all mean ?

if you gave that explanation to a complete newbie and told him to apply this logic and crack on with trading, what is he supposed to do with that information ?

Trade a price reversal ?

what will he say to the guy next to him who is playing the Stochastic "Pop" and going with the Momentum ? They each take the other side of each other's trade.

What's the difference between this and flipping a coin ? What benefit, other than psychological, does a Stochastics indicator provide ?

And what happens when price breaks out of it's ranging channel and the channel data to which the 6.1.1. refers to becomes obsolete or irrelevant ?

 

[rathcoole_exile]

Quite simply it is the most important tool anyone can have on their charts as it gives all the answers...

Duh....!

oh yeah, i never thought about it that way.

it's all I need to be successful ?

here we go then

 

[rathcoole_exile]

Quite simply it is the most important tool anyone can have on their charts as it gives all the answers...

Duh....!

actually, i think you mean "anyone who uses it without understanding it is the tool" ???

 

[wasp]

I concur with Nine, holy grail traders want indicators/volume/MP etc when they can't gauge a reliable edge through knowledge, understanding, good money management and well adjusted risk management.

If people realised you need to understand the market and its participants as best as you can (time) and the highest probability behaviour (time), then accept the future isn't written, but you can make consistent money through knowledge as an edge, then it does become very boring and you stop looking...

Until then, people will always look for new answers, or, if new, any answer...... All these indicators are like stabilisers... you won't really learn how to ride properly until you take them off and understand its a fine line of balance, knowing the mechanics of a bike, and realising that with or without stabilisers, you might fall off occasionally, you just get back on and protect yourself in case you do.