Article Candles Shed More Light Than MACD

T2W Bot

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Let’s take a trip off the beaten path. We’ll administer some necessary medicine to a revered technical indicator – the moving average convergence divergence (MACD). Enough articles have been written about the MACD to depopulate half the world’s rain forests, but little has been said about the downsides of using this very popular tool. In short, the MACD doesn’t work as well as some say it does. It’s a glorified moving average, and it’s weak at forecasting price direction. In this article we’ll cover the controversial perspective of those who spurn the use of this prevalent indicator and what can be used in its place
The MACD’s SeductionWhen applied over a long time frame, the signals generated by a given moving average will often seem very random, but a moving average can be a seductive indicator. An exponential moving average is just advanced enough to entice the delight of the technically-minded, but is not so arcane as to perplex the rest of us.
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dbphoenix

Legendary member
6,952 1,244
Mr. Philips makes some good points re the MACD. The same could be made for all indicators.

However, the points he attempts to make with regard to candles leave much to be desired. To argue that one is better than the other is not much different from arguing that red wine is better than white (or vice versa).

Candles have no more predictive value than the standard bar. Their only difference lies in how they illustrate the price movement. Add color and the opportunities for error increase dramatically. Some candlestick devotees will attempt to improve the predictive capabilities of candles by "blending" them, but one can accomplish much the same thing by moving to a larger interval (e.g., hourly v 15m, or weekly v daily).

Both candlestick and bar people overlook the fact that price is continuous. It couldn't care less how we illustrate it or bundle it or chop it up. Once one understands this continuity, all the kerfuffle about opens and closes and highs and lows and lengths and "pivots" and so on become immaterial.

Price is a movie, not a slideshow.

Db
 
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wcicom

Newbie
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I agree with DB.

I have been trading for many years and no indicator which had any kind of success in the past proofs to be effective these days, especially in short term trading. Once every retail trader understands what they are up against when trying to day trade a market like ES - they will realize that it takes a set of very modern dynamic tools not to be overwhelmed by sophisticated algo trading used in every liquid Market today.
Even well known and popular patterns have half reliability today versus only 15 years ago, like H&S, Gartley and so on.

So not MACD nor candlesticks will give you any kind of edge out there, for every popular indicator used by crowd there are algo's running programmed to fool those all day long.

Good luck,

Sam
 

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