Most Indicators are useless - why does anyone bother with them?

[darktone]

If i could find just one reliable S/R and pull-back marking indicator, trading would be a doddle.

Whats wrong with price action in a smaller tf that confirms your view when the market what you consider to be be a "pullback"?

 

[JTrader]

Whats wrong with price action in a smaller tf that confirms your view when the market what you consider to be be a "pullback"?

I like KISS, and to be able to easily manually/visually backtest an approach.

Referring to the other timeframe/s would make it very heavy on discretionary decisions, and extremely difficult to easily check how this has performed in the past.

 

[Dinos]

Disagree chaps (just to raise the debate).

I use indies (3) not set to standard setting, alot of trial and error and backtesting, used together with an MA and price action, this has enabled me to reduce whipsaw trades and is giving me an 85% success rate.

It has become fairly mechanical, when I see the set up, in without hesitation (having complete trust in the system) works on all timeframes and exit on a pre-defined price.

For example, 1 min chart yesterday, indicated 22 trades, 18 winners, 3 losers, no thought process behind the trades, trading the plan, taking the profts, minimising the losses.

So to say indies are useless, sorry chaps, I disagree, but its down to the individual trader and what they are comfortable with I suppose.

 

[JTrader]

Disagree chaps (just to raise the debate).

I use indies (3) not set to standard setting, alot of trial and error and backtesting, used together with an MA and price action, this has enabled me to reduce whipsaw trades and is giving me an 85% success rate.

It has become fairly mechanical, when I see the set up, in without hesitation (having complete trust in the system) works on all timeframes and exit on a pre-defined price.

For example, 1 min chart yesterday, indicated 22 trades, 18 winners, 3 losers, no thought process behind the trades, trading the plan, taking the profts, minimising the losses.

So to say indies are useless, sorry chaps, I disagree, but its down to the individual trader and what they are comfortable with I suppose.

I wonder - if it were not for the inclusion of your seemingly good interpretation of price action within this system, and you were left with just the indicators, if the success rate would drop considerably though :idea:.

 

[FXSCALPER2]

I like KISS, and to be able to easily manually/visually backtest an approach.

Referring to the other timeframe/s would make it very heavy on discretionary decisions, and extremely difficult to easily check how this has performed in the past.

S/R levels are not variant to the choice of time frame. What you will find, of course, is S/R levels on smaller time frames may not yet show on larger time frames. So, for example, a newly formed S/R level on a 30 min chart will not show for a while on the 4 hr chart. However, for day trading, you can use that 30 min S/R comfortably because you don't have a higher time frame to worry about for that particular segment of price move. What you may have is another S/R level from earlier moves, but you can correctly ignore that by narrowing your context to the recent price action and deciding to stay shorter term than including the earlier moves would allow. If your new S/R levels are broken, you can then trade off the higher time S/R.

For testing purposes, however you will have none of the above comlications because you will have S/R levels at exactly the same place on all time frames, albeit less clear as you go to the really big time frames. In general, you will see the levels more clearly the more price bars you have in any segment.

 

[Dinos]

I wonder - if it were not for the inclusion of your seemingly good interpretation of price action within this system, and you were left with just the indicators, if the success rate would drop considerably though :idea:.

JTtrader, correct, the indies etc, set my early "warning" of an potential trade, the Price Action, MA and 1 indy are the key features what the trade is based on.

Without the the Price and MA, as you say the stats, do indeed drop

 

[Citizen2007]

There have been some intelligent responses to this thread so far.

When I read posts like '...most or all indicators don't work/are useless what the authors are really saying is that they haven't found a way to make money through thieir use or for whatever reason prefer not to use them. There was a guy over at forexfactory recently saying it's impossible to make money on the sub 1hr charts and that it's just the amatuers/losers that use them and fibs/trend lines etc... Again what he was saying was that he hadn't found a way of using sub 1hr charts effectively to give him consistent profit.

This distinction is important in itself, particularly for new/inexperienced traders reading this thread.

I agree with your comments here bbmac. Everyone has a different approach and understanding of what works and what does not.

From my experience i have found that whether you use price or an indicator, both used correctly will give an entry/exit at roughly the same level.

I personally use indicators only, MACD and EMA and find them to be highly effective. Thats because i have found a way to use them that allows me to use them profitably. Nearly all people have called MACD a lagging indicator, i actually use it as a leading indicator in combination with EMA,s.

IMO i find that the indicators allow for a more calmer approach to trading whereas price is a big factor in inducing psychology more rapidly. Using indicators it is easier to remain in your trade when price is moving erratically and giving no clear idea of direction.


When i first moved away from volume and began using indicators, i had charts with no price bars showing, only indicators. This approach allowed me to focus on the indicator without being distracted by the green and red bars produced by price movement.

 

[darktone]

I like KISS, and to be able to easily manually/visually backtest an approach.

Referring to the other timeframe/s would make it very heavy on discretionary decisions, and extremely difficult to easily check how this has performed in the past.

Well to me, SR Is very visual in say 4hr 1hr ? As far as discretion goes its not more than say an MA cross is it?

Example.. Recent 4hr range is trending up and 200 wide S > R. Weve retraced to within 30 pips of the previous 4 hour low. Hourly decent has slowed and youve just seen a HL and HH in your 5 min chart!

Do you really need a MA with confirming RSI turn around and touch the ground MACD divergence comfirmation before you buy it?? .

To me indicators just breed indecision. But thats just me! :whistling

 

[rathcoole_exile]

Do you really need a MA with confirming RSI turn around and touch the ground MACD divergence comfirmation before you buy it?? .

personally yes. because i'd rather miss out on a few points by avoiding trying to catch exact reversal points and just grab a few points in the middle of a confirmed move.
To me 30 points 80% of the time beats 50 points 60% of the time. Any day.

 

[ZDO]

As has been said many times, many ways – price data is derived (ie distanced) from the auction and indicators are derived from price data. ie even further removed from the auction. Indicators are representations of representations. However to try to enroll every other human trader in the position that they are useless may be a reach. For one thing, an indicator is a process of projective beauty seen through the eyes of the talented and immersed master of an indicator. So when you say

I've experimented with most of them and they all suck, except for one ot two.

the key word is ‘experimented’. Sounds to me like you’ve jacked around with / randomly applied a smorgasbord of indicators instead of mastering just one (or two of them). Indicators are tools. Tools take practice to be able to discern when to select them for use and also take practice to use proficiently, creatively, and innovatively.

re

Thank god i have never been foolish enough to buy an indicator

Amen! Thank god you have never been foolish enough to buy an indicator – maybe someday though
http://www.trade2win.com/boards/general-trading-chat/18143-systems-sale-veritable-warehouse.html

 

[dbphoenix]

For one thing, an indicator is a process of projective beauty seen through the eyes of the talented and immersed master of an indicator. So when you say the key word is ‘experimented’. Sounds to me like you’ve jacked around with / randomly applied a smorgasbord of indicators instead of mastering just one (or two of them). Indicators are tools. Tools take practice to be able to discern when to select them for use and also take practice to use proficiently, creatively, and innovatively.

Oddly enough, though, once one has "mastered" an indicator, he no longer needs to plot it, though they're still good for scans.

 

[darktone]

personally yes. because i'd rather miss out on a few points by avoiding trying to catch exact reversal points and just grab a few points in the middle of a confirmed move.
To me 30 points 80% of the time beats 50 points 60% of the time. Any day.

Well what you could do is wait for 5 min price action then turn your screen off for a couple of hours, if its still going up when you turn it back on then buy! :smart:. Whilst ya trading screens off you might wana do a search for RR n MM!

BTW. I dont remember saying that i try to "catch the exact reversal point"! But ill put my hands up to "the closer the better"! :innocent:

 

[Windowsill]

I wonder - if it were not for the inclusion of your seemingly good interpretation of price action within this system, and you were left with just the indicators, if the success rate would drop considerably though :idea:.

The system back test, may limit the periods of trading to the most profitable.

 

[nkruger]

I find RSI divergence the best (only) indicator signal that is in anyway reliable/predictive etc......

You're right Garry ~ divergence is one for the daily armoury....

Don't forget the macs and stochs for divergence as well, newbies.




.

 

[nine]

It may well be that divergence is the best use of many indicators. If that's the case then you could take dbphoenix's advice and learn to see the divergence without the indicator.

Oddly enough, though, once one has "mastered" an indicator, he no longer needs to plot it, though they're still good for scans.

To give one example, with a 5,3,3 stoch, the fast stoch is just the relative position of the close within a 5 day channel (highest high and lowest low for the 5 days) so you can learn to see the divergence directly by putting a 5 period high low channel on the chart and watching price against the channel while also observing the stoch. The slow and slower stochs (dumb and dumber ... sorry) just apply a 3 period ma for smoothing and then a 3 period ma to the smoothed version for increased smoothing.

After a while you'll spot the divergence at 50 paces without needing the stoch or the channel. It worked for me although I still haven't relinquished my attachment to mas :cheers:

 

[bluetipex]

Well, I love indicators. I couldn't trade without them!!

I use a 5 min and 15 min chart side-by-side with the same selection of indicators on each. It's taken me 4 years of experimentation to finally get to the selection I use.

I find it so tedious when someone says "all indicators are useless". It's actually a very ignorant statement.

My sole income is from trading, and I managed to catch a 70 point move on the dax on Monday, and 184 points in one move yesterday. I just laugh when people tell me they don't work!!!

I've recently started trading someone else's account now too, for a slice of the profits, that's how confident I am in my system.

 

[Rhody Trader]

I use a 5 min and 15 min chart side-by-side with the same selection of indicators on each. It's taken me 4 years of experimentation to finally get to the selection I use.

I find it so tedious when someone says "all indicators are useless". It's actually a very ignorant statement.

My sole income is from trading, and I managed to catch a 70 point move on the dax on Monday, and 184 points in one move yesterday. I just laugh when people tell me they don't work!!!

One could make a very strong argument (and some have) that the indicators have nothing to do with your success. It's the four years you spent studying the market that is the reason you are trading as well as you are.

No matter how you slice and dice it, when you trade based on technical analysis (in any one of its various forms) everything boils down to pattern recognition. You may do it yourself or you might have the computer do it, but in the end that's what it's all about.

 

[Crap Buddist]

Confusediuos oftens say

He who sharpens biggest tool in box will know to sharpen all others, hai,hai,hai..

 

[rathcoole_exile]

Well, I love indicators. I couldn't trade without them!!

I use a 5 min and 15 min chart side-by-side with the same selection of indicators on each. It's taken me 4 years of experimentation to finally get to the selection I use.

I find it so tedious when someone says "all indicators are useless". It's actually a very ignorant statement.

My sole income is from trading, and I managed to catch a 70 point move on the dax on Monday, and 184 points in one move yesterday. I just laugh when people tell me they don't work!!!

I've recently started trading someone else's account now too, for a slice of the profits, that's how confident I am in my system.

you know what's so nice about this forum ?
I occasionally scan other forums, forexfactory for one. A statement like that on there would have provoked an absolute deluge of johnnie-come-latelys all clamouring, demanding even, to be told how bluetipex operates, what his method is etc.
Then would come the flood of messages advising him how to "improve", how to apply a filter etc etc blah blah.
T2W seems to have many more traders with a respectful, professional attitude that seems to quietly convey to the likes of bluetipex, "well done mate, good on ya"
So to all my fellow T2W buddies who didn't jump on the bandwagon, I say "well done mates, good on youse"

 

[trendie]

One could make a very strong argument (and some have) that the indicators have nothing to do with your success. It's the four years you spent studying the market that is the reason you are trading as well as you are.

No matter how you slice and dice it, when you trade based on technical analysis (in any one of its various forms) everything boils down to pattern recognition. You may do it yourself or you might have the computer do it, but in the end that's what it's all about.

reminds me of the story about the piece of jade.

guy wants to learn magic, and goes to a renowned magician.
magician puts something into the newbies hand and says, "this is jade, now sweep the floor".
next day, he again puts jade into the newbies hand and says "make the tea".
this goes on for weeks and weeks.
newbie gets frustrated, and asks whats sweeping and tea-making got to do with magic?
magician doesnt reply.
this goes on for another few days.
he again goes to the magician, and again the magician puts something into his hand, and says "clean the chimney".
the newbie says "I've had enough, I am leaving. Im not learning anything. And by the way, this isnt jade!".

I am sure I have read this little story in the Market Wizards books.

You have spent 4 years learning about squiggly lines, but perhaps you have osmotically learned to distinguish a valuable gem from a duff rock.