indicators!! as useful as a polished turd

[tropical_goblin]

i know i am opening a can or worms here with many of you emotionally attached to your indicators. but have you ever considered using price action instead?

 

[north5]

Hi - I'm pretty new to talking about this stuff with others so I hope I am not misusing terms or misunderstanding them. Please forgive me if I do.

My self learning has led my to believe that indicators are great at telling you what people used to think, and price movement at telling you how people are thinking (or reacting )now.

For me I use P&F as the basis of my trading strategy - I hope this is what you would term price action. I also gather indicators (some standard, quite a few adapted).

What I have been looking for (and hopefully found) are points where conflict in these occur and some expectation of the continued movement can be found. I have looked for positions where price action doesn't correspond with the previous thinking. From this I have devised parameters that tell me if it is more likely that the price will return to previous thinking or move further from it.

So for me both are necessary.

 

[dcraig1]

IMHO this is pretty stupid thread, but for those new to these parts, it is worth observing that Grey1 who is certainly one of the best traders around here makes extensive use of indicators (or rather time series analysis) as a guide to market cycles. Both intraday and for longer period swing or position trading.

 

[Splitlink]

IMHO this is pretty stupid thread, but for those new to these parts, it is worth observing that Grey1 who is certainly one of the best traders around here makes extensive use of indicators (or rather time series analysis) as a guide to market cycles. Both intraday and for longer period swing or position trading.

It's, certainly, a subject that has been done to death over the last few years. I suppose that what goes around, comes around and, with the membership expanding constantly, all subjects must be brought up again, periodically.

There's nothing new under the sun, but we live in hope.

 

[MrGecko]

Nevermind the utility of indicators. I find that a polished turd is a rather useful piece of apparatus to have on my person, so much so that I have had a custom Swiss army knife built to accomodate one.

 

[tropical_goblin]

Nevermind the utility of indicators. I find that a polished turd is a rather useful piece of apparatus to have on my person, so much so that I have had a custom Swiss army knife built to accomodate one.

lol, that cracks me up

 

[tropical_goblin]

IMHO this is pretty stupid thread, but for those new to these parts, it is worth observing that Grey1 who is certainly one of the best traders around here makes extensive use of indicators (or rather time series analysis) as a guide to market cycles. Both intraday and for longer period swing or position trading.

"stupid thread".. you are a very useful contribution to the thread with remarks like that. this actually is a very interesting topic and one that if many traders bothered to experiment with would turn their corner to success. i dont disagree with the fact that many traders use them with success but i am willing to bet that those same traders primary analysis is price action and indicators just back up the analysis. i am also willing to bet that those traders could also remove the indicators and trade just as successfuly. my point is that so many traders especially new traders rely more on indicators than price action and as a result, they lose so much information and go about the whole analysis the wrong way.

 

[Atilla]

Nevermind the utility of indicators. I find that a polished turd is a rather useful piece of apparatus to have on my person, so much so that I have had a custom Swiss army knife built to accomodate one.

Yes well put and good to see the thread in its rightful tracks.

I bought a piece of turd from an amusement shop last August and my trading has since improved by 50%...

Am I misguided or the turd in my position positively contributed to my trading?

 

[Splitlink]

"stupid thread".. you are a very useful contribution to the thread with remarks like that. this actually is a very interesting topic and one that if many traders bothered to experiment with would turn their corner to success. i dont disagree with the fact that many traders use them with success but i am willing to bet that those same traders primary analysis is price action and indicators just back up the analysis. i am also willing to bet that those traders could also remove the indicators and trade just as successfuly. my point is that so many traders especially new traders rely more on indicators than price action and as a result, they lose so much information and go about the whole analysis the wrong way.

I use an average, but those "extras" stuck underneath the main chart, I have no use for them, at all. I don't have much truck with turds, either, polished or otherwise. Pull the plug on the lot of them!

 

[MrGecko]

Before this thread deteriorates into a barrage of poo jokes...

Indicators vs. No indicators vs. Fundamental vs. Quantitative etc... has already been covered umpteen times elsewhere, and most of us have made our contributions / prejudices' known already. Whichever techniques a trader uses to find opportunities, there will always be a group of other traders that disagree - either with the modus operandi, or the opportunity itself (and sometimes both). For the most part, though, we accept each others differences and get along just fine, without taking the p!ss too much.

Personally, I do not use technical indcators at all. Whatever one's views on them to say that they are useless, though, is a bridge too far. I interpret your original statement:

indicators!! as useful as a polished turd

i know i am opening a can or worms here with many of you emotionally attached to your indicators. but have you ever considered using price action instead?

as:

Hi! I use Price Action to trade, and I think I'm pretty sh!t hot.

I have tried, but couldn't ever trade profitably with technical indicators

I think people who like to use indicators are a little bit silly, they would be much better off if they did things the way I do.

Which is fine.

Like it or not, there are traders who put technical indicators to good, profitable, use. There are some who don't, just as there are some PA traders that look for, and trade, setups that aren't there.



Now; back to the poo jokes.

 

[dcraig1]

"stupid thread".. you are a very useful contribution to the thread with remarks like that. this actually is a very interesting topic and one that if many traders bothered to experiment with would turn their corner to success. i dont disagree with the fact that many traders use them with success but i am willing to bet that those same traders primary analysis is price action and indicators just back up the analysis. i am also willing to bet that those traders could also remove the indicators and trade just as successfuly. my point is that so many traders especially new traders rely more on indicators than price action and as a result, they lose so much information and go about the whole analysis the wrong way.

Well, you are pretty much wrong in the case I cited, and I stand by my comment that the thread title is stupid.

The problem with the "all you need is a candlestick chart" brigade is that you are missing so much information about the market. This is especially true in the case of stocks where you want to be long the very best stocks and short the very worst. So how do you find the very best stocks for example ? Not by a lot of hand waving about price action.

In stock index futures, there is useful information to be gained from the order flow and traded bid/ask delta. This information is not just a transformation of the OHLCV time series and in the case of limit orders in the book it is the only data that leads price in any sense whatever.

Market internals can also be useful. Again this is not in a candlestick chart or OHLCV series it is plotting.

Paul Rotter says you must understand the order book to trade futures successfully. Whether this is true or not, I would think that his opinion certainly deserves some consideration. This is not price action.

 

[tropical_goblin]

Before this thread deteriorates into a barrage of poo jokes...

Indicators vs. No indicators vs. Fundamental vs. Quantitative etc... has already been covered umpteen times elsewhere, and most of us have made our contributions / prejudices' known already. Whichever techniques a trader uses to find opportunities, there will always be a group of other traders that disagree - either with the modus operandi, or the opportunity itself (and sometimes both). For the most part, though, we accept each others differences and get along just fine, without taking the p!ss too much.

Personally, I do not use technical indcators at all. Whatever one's views on them to say that they are useless, though, is a bridge too far. I interpret your original statement:



as:



Which is fine.

Like it or not, there are traders who put technical indicators to good, profitable, use. There are some who don't, just as there are some PA traders that look for, and trade, setups that aren't there.



Now; back to the poo jokes.

Excuse me MrGecko but i dont find it amusing that you have manufactured a quote that i dint not write. i have in no shape or form written anything to pertray i am above anyone else yet you have taken it upon yourself to bring your arrogance to the table and quote me in that light. if you could just peel off that thick skin of yours and partake in the conversation with less testosterone and perhaps some brains then maybe forums like this will be a far better place. i am so tired of traders that are enjoying success paint arrogance all over forums like this destroying the potential for it to be a more mature and respectful place for all to enjoy. if you cannot contribute like a mature person without a head the size of an elephants ass then i suggest you dont comment at all. i understand much of these conversations have reapeated over time but the world is bigger than your mind MrGecko. there are other people out there that come on board with no knowledge of the ongoings in the past.

 

[tropical_goblin]

Well, you are pretty much wrong in the case I cited, and I stand by my comment that the thread title is stupid.

The problem with the "all you need is a candlestick chart" brigade is that you are missing so much information about the market. This is especially true in the case of stocks where you want to be long the very best stocks and short the very worst. So how do you find the very best stocks for example ? Not by a lot of hand waving about price action.

In stock index futures, there is useful information to be gained from the order flow and traded bid/ask delta. This information is not just a transformation of the OHLCV time series and in the case of limit orders in the book it is the only data that leads price in any sense whatever.

Market internals can also be useful. Again this is not in a candlestick chart or OHLCV series it is plotting.

Paul Rotter says you must understand the order book to trade futures successfully. Whether this is true or not, I would think that his opinion certainly deserves some consideration. This is not price action.

i absolutely agree in other markets you have different tools at your disposal. but if you didnt notice this was posted in the forex forum which those tools in the forex world are as useful as polished turds. it is very funny when one speaks of price action it is automatically assumed to be a candle chart with candle formations. if this is how you define price action by mearly reading candle formations then you need to look again.

 

[dcraig1]

i absolutely agree in other markets you have different tools at your disposal. but if you didnt notice this was posted in the forex forum which those tools in the forex world are as useful as polished turds. it is very funny when one speaks of price action it is automatically assumed to be a candle chart with candle formations. if this is how you define price action by mearly reading candle formations then you need to look again.

Sounds like a good reason to stay away from forex. I just cannot see the fascination with fx, other than being able to trade tiny accounts with huge margin - a very tough game.

 

[tropical_goblin]

Sounds like a good reason to stay away from forex. I just cannot see the fascination with fx, other than being able to trade tiny accounts with huge margin - a very tough game.

fx is like every market has its own variables. in fact it is the fx market that really highlights how so many go wrong relying on indicators. unlike other markets where you can follow the flow of money and use all sorts of tools a typical fx trader has 3 areas only.

1) economic data
2) price action
3) indicators

90% of fx traders follow systems where signals are given from indicators. it is very clear that only the traders that use price action followed by indicator confirmation are the winners. this highlights why all the newbies fail, they tend to look at indicators as the holy grail. so why then if successful traders use indicators as a confirmation dont just remove them alltogether. since it is not the indicators that is the foundation of their success it is the skill of reading the chart without them that is their key. i think it boils down to humans being hard wired for various comforts and needs in life that they hang onto these useless tools for many reasons, be it that visual confirmation, what we see is what we believe or plain emotional comforts. fx is not difficult but i say this as someone who trades it successfuly , although i also say it from someone who has also experienced the chaos of indicators. its like a typical scenario in life, people that travel the world seem to have a far wider view on worldly issues as opposed to people that never go anywhere being very narrow sighted. i am mearly opening the debate on the subject and hopefully some people just might listen and have a go at what has a high probabiliyty of turning from an unsuccessful fx trader into a successful one.

 

[MrGecko]

Well, you are pretty much wrong in the case I cited, and I stand by my comment that the thread title is stupid.

agreed

The problem with the "all you need is a candlestick chart" brigade is that you are missing so much information about the market. This is especially true in the case of stocks where you want to be long the very best stocks and short the very worst. So how do you find the very best stocks for example ? Not by a lot of hand waving about price action.

In stock index futures, there is useful information to be gained from the order flow and traded bid/ask delta. This information is not just a transformation of the OHLCV time series and in the case of limit orders in the book it is the only data that leads price in any sense whatever.

Market internals can also be useful. Again this is not in a candlestick chart or OHLCV series it is plotting.

Never traded stocks, but I do imagine that there are pieces of information that are more appropriate to have for equities trading than other products. Agree that hand waiving though, unless you are bringing in an aeroplane in from a runway, is not much use.

Paul Rotter says you must understand the order book to trade futures successfully. Whether this is true or not, I would think that his opinion certainly deserves some consideration. This is not price action.

Disagree (not that he should be listened too, that studying the DOM is not Price Action).

Candlestick's are not Price Action, they are simply a convenient way to display it.

Someone who says "ooh, look - candlestick pattern XYZ; I'm going short" is using candlestick patterns as a technical indicator. IMO, this is not how PA is applicable to trading.

Conventional analysis of PA is about studying the markets reaction to a product or contract trading at specific price levels. By identyfying prices which the market considers significant (more accurately, has considered significant in the past), observing the reaction when prices reach these levels, and acting accordingly, are where candlesticks can be useful. The "signal" that a tradeable opportunity may energe is not the candlestick, but the markets reaction to price which the candle conveys so effectively. A subtle difference, but it is important to highlight that, for PA trading, it is prices that are the "horse" and candlesticks the "cart".

This is also true for using the DOM, albeit on a much shorter timeframe. The orderbook is used to highlight, at any one time, the ratio of buyers to sellers at any one price (or series of 20 prices). This, combined with T&S, can be used to determine qualitative information about the view of the market (i.e. bids >> offers => bullish sentiment).

Both DOM and candlesticks are tools used to display the reaction of the market at specific prices. For candlesticks, prices that have been important in the past are significant; for the DOM, it is prices that have an unusually large numbers of buyers or sellers. Either way, it is the reaction of the market to these prices that is used to trade, and so IMO it is clear that the two techniques are very similar indeed.

** It should be pointed out that the orderbook is useful for some product, not all - and the same is true for candlesticks. Experience of watching the DOM for popular exchange traded futures (such as the bund, bobl, schatz et al, to which Rotter is referring) is necessery to identify the unique phenomena that go on in that particular market.

 

[tropical_goblin]

Candlestick's are not Price Action, they are simply a convenient way to display it.

Someone who says "ooh, look - candlestick pattern XYZ; I'm going short" is using candlestick patterns as a technical indicator. IMO, this is not how PA is applicable to trading.

Conventional analysis of PA is about studying the markets reaction to a product or contract trading at specific price levels. By identyfying prices which the market considers significant (more accurately, has considered significant in the past), observing the reaction when prices reach these levels, and acting accordingly, are where candlesticks can be useful. The "signal" that a tradeable opportunity may energe is not the candlestick, but the markets reaction to price which the candle conveys so effectively. A subtle difference, but it is important to highlight that, for PA trading, it is prices that are the "horse" and candlesticks the "cart".

This is also true for using the DOM, albeit on a much shorter timeframe. The orderbook is used to highlight, at any one time, the ratio of buyers to sellers at any one price (or series of 20 prices). This, combined with T&S, can be used to determine qualitative information about the view of the market (i.e. bids >> offers => bullish sentiment).

Both DOM and candlesticks are tools used to display the reaction of the market at specific prices. For candlesticks, prices that have been important in the past are significant; for the DOM, it is prices that have an unusually large numbers of buyers or sellers. Either way, it is the reaction of the market to these prices that is used to trade, and so IMO it is clear that the two techniques are very similar indeed.

** It should be pointed out that the orderbook is useful for some product, not all - and the same is true for candlesticks. Experience of watching the DOM for popular exchange traded futures (such as the bund, bobl, schatz et al, to which Rotter is referring) is necessery to identify the unique phenomena that go on in that particular market.

you are absolutely spot on.

 

[Trader333]

tropical_goblin,

i am mearly opening the debate on the subject and hopefully some people just might listen and have a go at what has a high probabiliyty of turning from an unsuccessful fx trader into a successful one.

Sounds good, (and I am not saying this tongue in cheek), so will you be offering some thoughts on how to move forward ?

Also as you trade currencies, do you do any kind of inter-currency price analysis other than the pair that you intend trading ?


Paul

 

[Paul71]

i know i am opening a can or worms here with many of you emotionally attached to your indicators. but have you ever considered using price action instead?

This really annoys me this type of thread!

The markets are random, got it! How the hell is anybody on this planet supposed to know if a market is going up or down without MAs?

It really beggars belief!

REMEMBER! Price is not doing anything, until the MAs signal that price is doing something.

I'm really sick to death of all this indicator 'knocking'.

 

[dcraig1]

This is also true for using the DOM, albeit on a much shorter timeframe. The orderbook is used to highlight, at any one time, the ratio of buyers to sellers at any one price (or series of 20 prices). This, combined with T&S, can be used to determine qualitative information about the view of the market (i.e. bids >> offers => bullish sentiment).

I don't agree with the bit about bids >> offers implying bullish sentiment. Typically in sustained uptrends in SIFs, there is consistantly more size on the ask and the converse is true of downtrends. It depends on context.

If you look at a contract such as the DAX, any amount of size on the bid or ask can be taken out in the blink of an eye when there is strong trend.