Is it true, you can trade without indicators and candlesticks?

[barjon]

..........I'll tell you what though - let's expand the offer I made earlier. If someone can give a combination of TA indicators, I will code it up and data mine across multiple markets to show how well they work (or not) in unison.............

ok, toastie

1. daily time frame - candles drawn on mid-price - rules for longs (shorts vice versa)
2. 3+ candle retracement in established uptrend not exceeding 50% of last move on the close (ie: from last swing low)
3. Third or subsequent candle in retracement a hammer (shooting star for shorts)
4. enter long when offer exceeds high of hammer - stoploss when bid takes out low of hammer.

Better not confuse matters with how to manage things from there - just be content with direction?

Here's the latest example I've got so you get the picture. It's not a very good one since the gaps made it difficult to trade. Direction was good though

jon

 

[spy74]

Spy - let's say candlestick formations work 30% of the time and RSI makes money 30% of the time. Surely the combination of the 2 would see you making money 10% of the time. Combining 2 things that work poorly on their own isn't going to give you something that works well.

I'll tell you what though - let's expand the offer I made earlier. If someone can give a combination of TA indicators, I will code it up and data mine across multiple markets to show how well they work (or not) in unison.

As for Nison - he's not a trader, he makes his money from his teaching businesses, books, articles, TV appearances etc. He's a bit of a celeb.

Why is his opinion on what would make money trading so highly valued?

sorry to butt in again. i don't agree with your idea of simply multiplying the probabilities together to gauge the combined effectiveness of two TA indicators - the relationship is not that straight forward

if we start off with analysis of basic trend off a candlestick chart, using price action to determine the direction of the trend - if any, then focus on finding a good reward/risk opportunity to join that trend. So if we've identified a downtrend, then i'm only looking for candle formations which are bearish and offer a shorting opportunity. now filter that down again to bearish/rejection candles with-in the 50-61.8% area in a Fib retracement (measured off the last LH to the last LL in the trend) - providing that the trend is still in tact, then we've filtered out many of the signals generated by just candlesticks alone or just entering off a fib alone. the fact that we've started off with a basic check on trend, then looking for bearish price action around a retracement area within that trend leads to a higher probability set-up and a better reward/risk proposition than if you just entered a trade of the last bullish engulfing pattern you saw.....

 

[neil]

Re: Is it true, you can trade without candlesticks?

You could trade without candles but it would be awfully dark in your room

 

[Windowsill]

I been reading posts across the net about how some traders don't use indicators like moving averages as they are lagging indicators. Only taking past actions to predict future price movement. Some traders trade using candle sticks, the tape, pivot points, Fibonacci lines, while others trade doing all the above but no candlesticks. Then there are traders who only trade the tape. Is this all really possible?

I can't find hardly an information on tape reading, where do I start?

They say to trade the market you need to learn price action which is No1 way to predict future price movement and then you can master order flow and finally learn to read the tape to become a hot shot trader that can trade without indicators and choose whether or not to trade with candlesticks. This is all sounds awesome, but is it possible?

If you use charts at all..you need some representation of price and candlesticks are as good as anything & better than most.
Regards indicators, they are like stabilisers on a bike. Sooner you can be rid of them the better.

 

[Windowsill]

ok, toastie

1. daily time frame - candles drawn on mid-price - rules for longs (shorts vice versa)
2. 3+ candle retracement in established uptrend not exceeding 50% of last move on the close (ie: from last swing low)
3. Third or subsequent candle in retracement a hammer (shooting star for shorts)
4. enter long when offer exceeds high of hammer - stoploss when bid takes out low of hammer.

Better not confuse matters with how to manage things from there - just be content with direction?

Here's the latest example I've got so you get the picture. It's not a very good one since the gaps made it difficult to trade. Direction was good though

jon

Define "established uptrend" :smart: He might then be able to do a mathematical model!!!

 

[barjon]

Define "established uptrend" :smart: He might then be able to do a mathematical model!!!

'praps he wouldn't accept that there was such a thing.

my plan definition is:

Trend - a change in swingtrend is established by a convincing break of an earlier swing high (low) or break out from a rectangular congestion area. It is deemed to continue until an established swing low (high) is breached.

I know, I know - define "convincing". Well, that's a judgement call but, for the sake of the exercise, let's say 2 daysworth of closing outside the trigger level.

Alternatively, I'm happy to accept whatever toastie finds easiest to model

jon

 

[Shakone]

DT could you backtest your method? Reading of DOM? Reading of intention, when there is spoofing, when there is an iceberg order? How can you prove that this works? If you can't you're in the same boat as the bar/candle traders.

For some reason you want to believe that what you do is something different to those. But the more you talk about what you do, the more it becomes clear, you use bars or indicators to filter out potential good trades, and then use something which can't be backtested to trigger entry - the same as many others. If it works that is great. The problem is that nobody is saying that what you do can't be successful, but you ARE saying that bars can never be successful, no matter how they are traded. And you're just plain wrong.

 

[Splitlink]

DT could you backtest your method? Reading of DOM? Reading of intention, when there is spoofing, when there is an iceberg order? How can you prove that this works? If you can't you're in the same boat as the bar/candle traders.

For some reason you want to believe that what you do is something different to those. But the more you talk about what you do, the more it becomes clear, you use bars or indicators to filter out potential good trades, and then use something which can't be backtested to trigger entry - the same as many others. If it works that is great. The problem is that nobody is saying that what you do can't be successful, but you ARE saying that bars can never be successful, no matter how they are traded. And you're just plain wrong.

There are a lot of people with their own system of trading. I put them down to being the "academical" traders. Those who love working at systems. Personally, I've never seen the point of anything other than what I see on a chart. If it's wrong, it's wrong but at least I haven't spent too much time working on the "system" which, let's face it, is likely to be just as wrong as mine.

Anyway, God Bless and Good Luck to you all (if you have time for trading)

 

[DionysusToast]

ok, toastie

1. daily time frame - candles drawn on mid-price - rules for longs (shorts vice versa)
2. 3+ candle retracement in established uptrend not exceeding 50% of last move on the close (ie: from last swing low)
3. Third or subsequent candle in retracement a hammer (shooting star for shorts)
4. enter long when offer exceeds high of hammer - stoploss when bid takes out low of hammer.

Better not confuse matters with how to manage things from there - just be content with direction?

Here's the latest example I've got so you get the picture. It's not a very good one since the gaps made it difficult to trade. Direction was good though

jon

OK - I shall now don my thinking cap. I do have the swings coded already - DT's patented swingoramafinder.

BTW - that's an 'orrible place for a stop loss.

 

[DionysusToast]

sorry to butt in again. i don't agree with your idea of simply multiplying the probabilities together to gauge the combined effectiveness of two TA indicators - the relationship is not that straight forward

I would agree with you ONLY if the various indicators you used were based on different data sets.

The concept of confluence is that if many things line up, it is better than 1 thing lining up. The error in this type of thinking is that all of the indicators used were based on the exact same set of data so will surely end up agreeing with each other.

if we start off with analysis of basic trend off a candlestick chart, using price action to determine the direction of the trend - if any, then focus on finding a good reward/risk opportunity to join that trend. So if we've identified a downtrend, then i'm only looking for candle formations which are bearish and offer a shorting opportunity. now filter that down again to bearish/rejection candles with-in the 50-61.8% area in a Fib retracement (measured off the last LH to the last LL in the trend) - providing that the trend is still in tact, then we've filtered out many of the signals generated by just candlesticks alone or just entering off a fib alone. the fact that we've started off with a basic check on trend, then looking for bearish price action around a retracement area within that trend leads to a higher probability set-up and a better reward/risk proposition than if you just entered a trade of the last bullish engulfing pattern you saw.....

I understand the description - but it is a marketless description, it is a description without any analysis of who the players are in the market and why they participate. It is without consideration of any supply constraints in the market. It has no consideration as to whether this is derivative market with something else underlying it (or a cash market with a derivative based on it). It is a description without mentioning the trading horizon - are we to think that short term manipulation has the same footprint of long term price moves ? It is a description that pays no heed to scheduled news announcements. It is a description that pays no heed to potential expiries/rollovers.

It is very simple indeed, it is very attractive to think this is all you need. This is why so many people have faith in it - because it gives you a single methodology for all markets in all timeframes.

Sadly, its not enough. Interestingly, once you accept this & look for other things that can tip the odds in your favour, you will find that these things are no more complex than the textbook TA that offers a one-stop solution but fails on delivery.

 

[DionysusToast]

DT could you backtest your method? Reading of DOM? Reading of intention, when there is spoofing, when there is an iceberg order? How can you prove that this works? If you can't you're in the same boat as the bar/candle traders.

Good point.

You can only backtest a mechanical system. TA offers a mechanical solution. IMy argument is that discretion should be embraced because every situation you find yourself in is going to be different. I think experience and discretion wins over layers and layers of TA.

I do intend to make this easier though - TS have just brought out V9 which promises to be one of the first platforms where you can programmatically access DOM and T&S information. This, in theory means you can very accurately get a picture of the spoofing & iceberging as it occurs. Right now, you have to hold a lot in your head and it is tiring. I have yet to discover if this aspect of the language will be fast enough and it's early beta, so I'll leave other, more nerdy people to look into it.

For some reason you want to believe that what you do is something different to those. But the more you talk about what you do, the more it becomes clear, you use bars or indicators to filter out potential good trades, and then use something which can't be backtested to trigger entry - the same as many others. If it works that is great. The problem is that nobody is saying that what you do can't be successful, but you ARE saying that bars can never be successful, no matter how they are traded. And you're just plain wrong.

Actually - I don't want to believe I am doing something different. I do look at the same charts as everyone else. With day trading, I look at price, but I don't care about the actual candles because I'm generally looking at any price level in perspective of the overall day/prior day.

What I am absolutely against is anything mechanical because it's a cop out. Anything that says "when this + this + this then trade" in my opinion is not going to work.

For various reasons I am going to blame the work of people like De Bono for cementing this philosophy. According to De Bono, society has us brought up to think in absolutes and be attracted to very firm rulesets. We are simply not very open to 'fuzzy' thinking and this is why people grab onto TA because it is absolute.

 

[spy74]

I would agree with you ONLY if the various indicators you used were based on different data sets.

The concept of confluence is that if many things line up, it is better than 1 thing lining up. The error in this type of thinking is that all of the indicators used were based on the exact same set of data so will surely end up agreeing with each other.



I understand the description - but it is a marketless description, it is a description without any analysis of who the players are in the market and why they participate. It is without consideration of any supply constraints in the market. It has no consideration as to whether this is derivative market with something else underlying it (or a cash market with a derivative based on it). It is a description without mentioning the trading horizon - are we to think that short term manipulation has the same footprint of long term price moves ? It is a description that pays no heed to scheduled news announcements. It is a description that pays no heed to potential expiries/rollovers.

It is very simple indeed, it is very attractive to think this is all you need. This is why so many people have faith in it - because it gives you a single methodology for all markets in all timeframes.

Sadly, its not enough. Interestingly, once you accept this & look for other things that can tip the odds in your favour, you will find that these things are no more complex than the textbook TA that offers a one-stop solution but fails on delivery.

it was just a simple set-up to illustrate a point that you can't just simply say "candles work 30% of the time, XYZ indicator works 30% of the time, therefore combining them will work 10% of the time" the maths is just not that straightforward - that's all.

anyways, the point is really that I've done ALOT of work and found a way of looking, interpreting and trading what i see in front of me that has given me a trading strat with +ve expectancy - thankfully for me and my simple mind, this only involves a few simple TA principles, some entry and exit principles, and some $$ management guidelines. i reckon half the stuff you mentioned above you could only really guess anyway! (although i'm aware that MP offers a way of trying to determine when longer term TF players are getting involved....)

obviously TA all comes down to an individuals interpretation and application of where they see S&R, where to draw Fibs, how to define a trend etc etc....which of course is the art of TA. also worth noting that it took me quite a while on a Sim to be able to convert a simple TA set-up into a decent trade that worked for me, precisely because learning how to enter and exit a market, where to place a stop, etc etc is a completely new kettle of fish indeed but that's a argument for another day i guess - (e.g one simple change to how I entered one of my TA set-ups had quite a significant impact on my results...)

the only true test of a trader and a trading strategy is consistently making $$ over the long run - and i'm most definitely no where near there yet, so perhaps you've been around for ages and know alot more than I do, but good 'ol TA seems to be doing the trick for now...so i'm happy to stick with it

 

[forker]

the problem with indicators is they do not take market context into account. by market context i mean areas where price will have trouble. another problem with indicators is they typically tend to operate by weighting bids or offers with a mathematical equation or algorithm. on the surface this might present a semblance of insight but in reality it is nothing more than an obscure view of what is actually happening.
now the problem with candle patterns is that most of them are nothing more than a waste of time in contemporary markets. i am not talking about the good ones like bullish\bearish engulfing, pin bars or as some like to call them Long-legged Doji\Hammer and Hanging-man. i am talking about the ones with the fancy names and usually consist of 3 or more bars. furthermore, the good ones like bullish\bearish engulfing and pin bars are usually viewed as " oh there is a candle pattern let me place a trade on it". what is wrong with this picture? yet again market context and the location of the pattern has been left out.
now this is not to say you cannot trade with indicators or you cannot trade with candle patterns successfully. there are numerous traders that use indicators and there are probably less that trade without but also successfully. i personally dont use indicators but this discussion isnt about me.

i think the ultimate problem with this topic is that we humans generally like to operate in a known world and are creatures of habit. the mystical search for the magic indicator, or system that basically prints on the screen buy or sell is actually a result of how we humans are programmed. we dont naturally think in probabilities, we like to see definitive choices and we dont like to lose.
why do some traders succeed and other fail. several books can be written on this subject but the outcome is the same it is basically how we are programmed. Successful traders aren't magical beings, they just understand their flaws and how they need to operate in the markets in order to make money.
a trader that is successful doesnt use a system. he\she employs a set of methods that present:
areas where trades more often that not occur, a trade signal (indicators or price alone), and trade management.
Furthermore (and this is where it all goes wrong for the losing trader), discretion which is driven by the traders market reading skills ( market context if you like, also if he\she uses fundamentals this is the area is will reside), understanding of risk in the sense of % of account, common sense, and knowing which trades to give a miss and which not (typically people take every trade they see). These are skills which are attained through market experience an cannot be avoided. traders tend to rely on tangibles yet they are merely tools of the trade which in their own right cannot make the success of a trader.
the point i am trying to make here is that indicators or not, its not the tools that makes you a success its how you use them and your ability the think unlike your birth given programming.

 

[barjon]

OK - I shall now don my thinking cap. I do have the swings coded already - DT's patented swingoramafinder.

BTW - that's an 'orrible place for a stop loss.

toastie

I appreciate the impossibility of backtesting discretion, but that's no problem. You find live ones and I'll just take 'em and await your decision.

For the old ones you find, that will give the clue as to whether that TA/candlestick pattern "works" in terms of direction. Shall we say a move in the right direction equivalent to the stoploss distance (1:1) without being stopped out first = "works"?

I know the stoploss is at an 'orrible place - I'm giving you all the advantages here and you can extend the 50% limit to 62% if you don't find many runners.

cheers

jon

 

[Splitlink]

Hi DT,

I respect you for the sincerity that you put into your posts. What I said is that you may be right or wrong with your assessments as I most certainly am. I believe that my errors come with timing, more than anything. It's no good being right next week if you are a day trader.

What I am interested in seeing is whether you are right and wrong by the same amount as me. Unless there is a definite improvement over my style, chart reading is good enough for me.

 

[barjon]

.............. TA offers a mechanical solution. IMy argument is that discretion should be embraced because every situation you find yourself in is going to be different. I think experience and discretion wins over layers and layers of TA....................

toastie

TA only offers a mechanical solution if you use it mechanically.

Otherwise, all it is doing is giving a pictorial representation of what is happening to price as opposed to a representation based on DOM and T&S numbers. Some people like numbers, some like pictures. But the end result isn't much different.

At some point both type of trader is going to have to make an assumption of where price is going next. I'm doing it via my picture, you via your numbers (and fundamentals). Then we both have to decide when to act on our assumption with a trade and here we both have to pick a specific number. I freely concede that your skill and experience may allow you to make a more elegant entry than mechanical me, but the important thing is that we are both acting on an assumption and not a certainty. imo where we go from hereon is the important bit.

jon

 

[DionysusToast]

I'm starting to feel all warm & fuzzy inside.

I agree that if it works - keep doing it until it doesn't work. Although you stand to become unstuck when it stops working if you never knew why it worked in the first place.

If we take a concept such as 'support' - it is a very simple concept. Price is supported by buyers who buy again at the same level (support succesful) or not (support failed). I have yet to meet a TA proponent who has come up with any of the following:

- why people would come in and buy again at the support level ? What is their motivation ?
- how support may differ when trading on different horizons - e.g. day trading vs swing trading
- how support may differ in infinite/finite supply markets - e.g. futures vs stocks
- how derivatives would impact support - e.g. an index impacting a futures market or options impacting a stock.

What you normally hear is "it just works". It's a faith based approach. How much better would these TA traders be if they thought about what was really occuring in the markets when these levels hit ?

It would be nice at some point for a TA trader to talk about something other that what is on their chart.

 

[spy74]

Toast, you've come a long way - perhaps that explains the warm fuzzy feeling - Charles Dow himself is smiling upon you

I've got no issues at all about keeping up with fundamentals, and considering how market events might impact supply/ demand and i spend a considerable amount of time chatting about that kind of stuff because I'm genuinely interested in markets.

But i would never enter a trade on it, simply because I trade a time-frame where you can't really trade off that kind of thing (IMO) because timing is too important. When i invest - like buy equities for my long term retirement portfolio - i only really consider that kind of thing, i couldn't really give a toss about big level on an hourly chart, if i'm looking at a stock to hold over the next 5 years, but obviously when i'm trading futures on an intra day basis - i care a whole lot about it.

I use charts & TA to help me interpret who's in charge of the market, and look for a good risk/reward proposition to get on board. not much else to it than that I'm afraid.

As for S&R, i cut my teeth as an equities operator, and would regularly deal with funds leaving chunks of a big big order at a certain level, they were happy to own at that level, if price ran away on them, then came back, providing their core view was in tact (usually longer term) they'd sit at the level chipping away until filled - sometimes hours, sometime days, sometimes weeks - in fact I've even had a couple that would work for months accumulating a position around the same price level. there's not a more important price in the market than the one you are long (or short) at, hence why I think S&R matters and I'm happy to incorporate in my trading.

 

[Splitlink]

DT, I don't know the answers to all your questions but couldn't the first one be answered with another question? How do you know that they are buyers opening trades? Couldn't they be stoplosses closing trades? Personally, I don't like horizontal lines all over the place, either, and I have got into arguments before over this, but it seems as if you, as well, form opinions about whether lines are support or resistance. We all do. Some are right and some wrong. Some, when they can't make their minds up, resort to Fibs. But all this another story.

What you have to do, if I am not losing track of the thread, here, is to tell us how many times you get it wrong against us. Then I'll say "damned if old DT doesn't know a thing, or two!" and whether it is worth the effort to go back to school, again.

But you have to hurry up, because my times running out.

 

[forker]

DT, I don't know the answers to all your questions but couldn't the first one be answered with another question? How do you know that they are buyers opening trades? Couldn't they be stoplosses closing trades? Personally, I don't like horizontal lines all over the place, either, and I have got into arguments before over this, but it seems as if you, as well, form opinions about whether lines are support or resistance. We all do. Some are right and some wrong. Some, when they can't make their minds up, resort to Fibs. But all this another story.

What you have to do, if I am not losing track of the thread, here, is to tell us how many times you get it wrong against us. Then I'll say "damned if old DT doesn't know a thing, or two!" and whether it is worth the effort to go back to school, again.

But you have to hurry up, because my times running out.

i struggle to understand how a trader can be profitable without taking into account support\resistance horizontally.