Indicators Or Price

[Citizen2007]

Hi,
Just reading another post on the board here and there was abrief discussion about indicators and price.

Do you think indicators work or do you trade on just price?
How does this decision determine the type of trader you are ?
Would you be a scalper using price?


Me, i used to use just price and volume. I now use indicators and have, at times used a chart with no price at all, just indicators. Used correctly i find they give very similar entry and exit points as i had when i used price only.

Would you agree with this notion ?

Thank You

 

[Hoggums]

Hi,
Just reading another post on the board here and there was abrief discussion about indicators and price.

Do you think indicators work or do you trade on just price?
How does this decision determine the type of trader you are ?
Would you be a scalper using price?


Me, i used to use just price and volume. I now use indicators and have, at times used a chart with no price at all, just indicators. Used correctly i find they give very similar entry and exit points as i had when i used price only.

Would you agree with this notion ?

Thank You

I'm sure there will be people who agree and disagree with this notion. I will be running a thread soon which will do some extensive backtesting on this very issue - to see if they really do work long term or whether the fact that most indicators are lagging causes them not to be profitable in the long term when you apply realism, money management and margin requirements to the equation.

 

[searchlight]

Reading various posts in different discussion boards about price and indicators, I came to conclusion that ones preference for one or the other is not decided for time frame, instrument traded,type of trade, etc...
It is the trader's philosophy about the markets in general is the determining factor.
There is a two distinct philosophical approaches to markets. Here's my observation of these approaches.

APPROACH 1: I know that, i don,t know what the market is going to do next.(prefers indicators.)
APPROACH 2: I know all the players in the market. Not only that, I know what they will do and why and how they will do it.(doesn't need indicators, price action says all.)

Fact that there is a both kind of traders in this community making living out of using one of this approaches shows there must be a merit using both approaches.
You wouldn't think so if you read the posts.Its gets personal very quickly , some times tread goes private.
I hope proponent of either approaches will (add,subtract,fine tune) improve my take on this approaches and make this tread valuable learning experience for us newbies and more!!!

 

[wasp]

A couple of links for you....

http://www.trade2win.com/boards/showthread.php?t=20705
http://www.trade2win.com/boards/showthread.php?t=20213

I have to admit I have gone full swing and I started purely on price, then added a few indicators, streamlined them and then split the 2 between accounts for cable. One account I use indicators and another I use price only.

Both work and the great thing about the indicators are the fact you can automate it. Indicators IMO are just like stabalisers really, they tell you the same thing as price, a little bit late but used correctly, not too late.

Not an expert on all the indicators but here is a couple of charts anyhow to explain what I mean...

 

[TheBramble]

I made an offer to another member recently and although they seem disinclined to take me up on my offer, I’ll do the same to you. My purpose is to demonstrate that by using sufficient context relative to your chosen trading timeframe, you will recognise that it is only ever price, time and volume that you ever use and these elements alone give you all the information you are ever going to need to construct and execute successful trading strategies.

I have located my original post on this topic and I re-post a redacted abstract of it here:-

If you care to give me the following set of charts, OHLC or Candle (they are both of equal use), all of which are to include Volume/OI on a separate scale:-

1. Your chosen instrument for the trading timeframe in which you have a primary interest.

2. Your chosen instrument for the next 3 superordinate timeframes to the trading timeframe in which you have a primary interest.

3. Your chosen instrument for the subordinate timeframe (if applicable – disregard if this is tick) to the trading timeframe in which you have a primary interest.

4. Commodities Index (CRB) Daily chart for 3 years leading to the period in question.

5. Gold Daily chart for 3 years leading to the period in question.

6. Dollar Daily chart for 3 years leading to the period in question.

7. T-Bond Price Daily chart for 3 years leading to the period in question.

8. Sector (if chosen instrument constitutes a sector) Daily chart for 3 years leading to the period in question.

9. Market Index (if chosen instrument constitutes an Index) Daily chart for 3 years leading to the period in question.

I will then tell you what indicator or indicators will give you the information you need for that instrument, at that particular cycle of the market and in relation to all other markets that influence, and/or are influenced by that instrument, at that point in time, in order to make a high-probability and low-risk trade. I will provide entry point and criteria, initial stop and three target ranges which will have criteria associated with them quite in addition to price level. I will recommend an exit strategy based on dynamic price and volume development which will limit your initial risk and also serve to preserve accrued profits whilst in the position. If additionally you care to suggest a real or nominal trading capital base, your investment profile aspirations and your empirical appetite for risk, I will even calculate your position size and (if appropriate to your profile and appetite) a scaling-in and scaling-out paradigm as well.

My belief, tempered and honed by many years experience in the markets, is that it is quite possible to reverse engineer any market snapshot consisting purely of time, price and volume and provide a large number of indicator setups which will give you a confirming position or view on the instrument under scrutiny. My point is though, why would you need to do this, to work with indicators if the pure time, price and volume data give you all you need anyway? Many seem to feel there is a simplicity in indicators which does not exist in the data on which they are based and from which they are constructed. The real awakening in my trading development was when I realised I had been ignoring the obvious and had been looking for simplicity by differentiating what I had made unnecessarily complicated through randomly gratuitous integration. In short, I got back to where I started, back to basics. Back to the place from where we all initiate our operations, whether we currently realise it or not.

But this is not to dismiss indicators. I have an equally strongly held belief that it was only though dedicated research and study into the construction of indicators and the construction of new indicators using cross—market data that I was able to more deeply and comprehensively understand the fundamental factors which appear to influence each market. And I do not mean fundamental in the sense of balance sheets and asset valuation (which in my view is deeply flawed, obsolete, invalid, untimely and ultimately, led by the technicals in any event), I mean in those genuinely fundamental structures which underlie and give tangible form to the existence and the manner of utilisation of the markets by the market participants.

 

[Charlton]

I made an offer to another member recently and although they seem disinclined to take me up on my offer, I’ll do the same to you. My purpose is to demonstrate that by using sufficient context relative to your chosen trading timeframe, you will recognise that it is only ever price, time and volume that you ever use and these elements alone give you all the information you are ever going to need to construct and execute successful trading strategies.

I have located my original post on this topic and I re-post a redacted abstract of it here:-

If you care to give me the following set of charts, OHLC or Candle (they are both of equal use), all of which are to include Volume/OI on a separate scale:-

1. Your chosen instrument for the trading timeframe in which you have a primary interest.

2. Your chosen instrument for the next 3 superordinate timeframes to the trading timeframe in which you have a primary interest.

3. Your chosen instrument for the subordinate timeframe (if applicable – disregard if this is tick) to the trading timeframe in which you have a primary interest.

4. Commodities Index (CRB) Daily chart for 3 years leading to the period in question.

5. Gold Daily chart for 3 years leading to the period in question.

6. Dollar Daily chart for 3 years leading to the period in question.

7. T-Bond Price Daily chart for 3 years leading to the period in question.

8. Sector (if chosen instrument constitutes a sector) Daily chart for 3 years leading to the period in question.

9. Market Index (if chosen instrument constitutes an Index) Daily chart for 3 years leading to the period in question.

I will then tell you what indicator or indicators will give you the information you need for that instrument, at that particular cycle of the market and in relation to all other markets that influence, and/or are influenced by that instrument, at that point in time, in order to make a high-probability and low-risk trade. I will provide entry point and criteria, initial stop and three target ranges which will have criteria associated with them quite in addition to price level. I will recommend an exit strategy based on dynamic price and volume development which will limit your initial risk and also serve to preserve accrued profits whilst in the position. If additionally you care to suggest a real or nominal trading capital base, your investment profile aspirations and your empirical appetite for risk, I will even calculate your position size and (if appropriate to your profile and appetite) a scaling-in and scaling-out paradigm as well.

My belief, tempered and honed by many years experience in the markets, is that it is quite possible to reverse engineer any market snapshot consisting purely of time, price and volume and provide a large number of indicator setups which will give you a confirming position or view on the instrument under scrutiny. My point is though, why would you need to do this, to work with indicators if the pure time, price and volume data give you all you need anyway? Many seem to feel there is a simplicity in indicators which does not exist in the data on which they are based and from which they are constructed. The real awakening in my trading development was when I realised I had been ignoring the obvious and had been looking for simplicity by differentiating what I had made unnecessarily complicated through randomly gratuitous integration. In short, I got back to where I started, back to basics. Back to the place from where we all initiate our operations, whether we currently realise it or not.

But this is not to dismiss indicators. I have an equally strongly held belief that it was only though dedicated research and study into the construction of indicators and the construction of new indicators using cross—market data that I was able to more deeply and comprehensively understand the fundamental factors which appear to influence each market. And I do not mean fundamental in the sense of balance sheets and asset valuation (which in my view is deeply flawed, obsolete, invalid, untimely and ultimately, led by the technicals in any event), I mean in those genuinely fundamental structures which underlie and give tangible form to the existence and the manner of utilisation of the markets by the market participants.

The Degrees

Excellent post - this is developing into an interesting thread. This treatment of the indicators/no indicators debate should prove illuminating.

Charlton

 

[DDI]

I find indicators a good confirmation tool especially when its in the direction of the major long term chart.

i.e imagine if instrument X is on a bear run on the daily chart but that bear run is only a retracement on a bullish weekly chart, then a bullish divergence on daily RSI or MACD (prefererably with a bullish candle formation) would give me confirmation of entering a long trade

 

[damianoakley]

Hi,
Just reading another post on the board here and there was abrief discussion about indicators and price.

Do you think indicators work or do you trade on just price?
How does this decision determine the type of trader you are ?
Would you be a scalper using price?


Me, i used to use just price and volume. I now use indicators and have, at times used a chart with no price at all, just indicators. Used correctly i find they give very similar entry and exit points as i had when i used price only.

Would you agree with this notion ?

Thank You

Me personally, I don't use any technical indicators at all - I'm all about price action and volume, but I fully accept that it's each to their own.

I've said on other threads that's it's very easy to get bogged down with indicators and forget to look at what the actual price of a share is doing, which in my opinion is the most important thing.

I just use price and volume, since most indicators are based on these two things anyway.


Thanks

Damian

 

[searchlight]

Wasp
Thank you for the links.I hope your indicators only account still continuos to show profit. how about "price action" only account? If it is, then you would be the perfect example how both approaches can be utilised by a single trader.

The Degrees
thank you for the excellent post. Assuming your's is an open invitation, I would like to take the challenge if i can please.
before I do that I will assume few(quite as few actually) things;
* That you will have access all the information you need in order to answer my questions.
*That all the followers of this tread will have access to chart of a stock in question.

If any of my assumptions is wrong , my apologies and I need members help to plug to holes.
here is the my questions:
I do watch WEEKLY charts and make decisions on that.
Stock in question is CAIRN ENERGY PLC (FTSE 250) Current price:1872 06/07
1-which indicator/s I need to use in order to make a high- probability and low-risk trade at this time of the market cycle?
2-what should be the entry point and the criteria?
3-what should be the initial stop and 3 target ranges you mentioned?
4-could you also recommend an exit strategy.
I hope i made a sense.I also would like to point out that above post on my part
for educational purposes only.

Best regards,

 

[TheBramble]

The Degrees
thank you for the excellent post. Assuming your's is an open invitation, I would like to take the challenge if i can please.
before I do that I will assume few(quite as few actually) things;
* That you will have access all the information you need in order to answer my questions.
*That all the followers of this tread will have access to chart of a stock in question.

If any of my assumptions is wrong , my apologies and I need members help to plug to holes.
here is the my questions:
I do watch WEEKLY charts and make decisions on that.
Stock in question is CAIRN ENERGY PLC (FTSE 250) Current price:1872 06/07
1-which indicator/s I need to use in order to make a high- probability and low-risk trade at this time of the market cycle?
2-what should be the entry point and the criteria?
3-what should be the initial stop and 3 target ranges you mentioned?
4-could you also recommend an exit strategy.
I hope i made a sense.I also would like to point out that above post on my part
for educational purposes only.

Searchlight, perhaps the wording of my post was unclear. It is not a challenge I am issuing. I am interested in demonstrating to you the basis upon which it is possible to accurately construct a trading position (which will also by definition carry the possibility of recommending criteria under which no active position be held) based purely on the Price, Volume and Time data available from a standard chart. I suggested a cross market set of charts with specific characteristics and with specific reference to a preferred trading timeframe be provided in order for me to carry out that analysis. I would then reverse engineer the analysis to show the complete set of indicators that would have been required to provide a similar confirmation of position. The point being to illustrate the gymnastics required to get from the base data (price, time and volume) to a usable set of indicators and to compare this with the accuracy and simplicity of an analysis made with the base data alone.

You seem to be asking me to provide you with just the end result; a signal, a tip, advice on a specific instrument. That wasn’t my purpose and is not my intent.

If you only want to trade based on someone else’s advice, knowledge, tips or even inside information, then there are abundant opportunities for you to do so. However, if you want to fully comprehend the basis under which you can begin to develop and set about subsequently enhancing your own process and method for a trading system which perfectly fits you and your trading requirements as they both change over time, then I’m happy to assist. As per the original schema.

As for tips, I don’t bet on horses, but if that’s all you want then you an have the 16:15 at Bath today – Up in Arms followed by Snake’s Head followed by Muraco. I have no idea if any of these will run, or if they will even finish or if they will perform as I have just randomly guessed, but if you’re going to make a living on tips, you’re probably as well to bet all you have as I have just suggested – and get it out of your system quickly.

 

[Jofstar]

Indicators

Cant add much to the above, but from experience too many people use indicators that they don't fully understand.

Unless you are clear how the underlying value is calculated and what it really refers to, you run the risk of investing on bad assuptions and thus losing hard earned cash.

This doesn't have to mean being an expert mathematician, just clever enough to do your research first.

 

[Rhody Trader]

The thing that everyone needs to realize, regardless of which way they go (indicators vs no indicators), is that it's all just a filter of one kind or another. The map is not the terrain, as the saying goes. In the end it probably doesn't really matter which filter you use, so long as you understand the limitations that filter has and what that means to how you see things.

 

[Joules MM1]

........it is quite possible to reverse engineer any market snapshot consisting purely of time, price and volume and provide a large number of indicator setups which will give you a confirming position or view on the instrument under scrutiny. My point is though, why would you need to do this, to work with indicators if the pure time, price and volume data give you all you need anyway? Many seem to feel there is a simplicity in indicators which does not exist in the data on which they are based and from which they are constructed. The real awakening in my trading development was when I realised I had been ignoring the obvious and had been looking for simplicity by differentiating what I had made unnecessarily complicated through randomly gratuitous integration. In short, I got back to where I started, back to basics. Back to the place from where we all initiate our operations, whether we currently realise it or not.

But this is not to dismiss indicators. I have an equally strongly held belief that it was only though dedicated research and study into the construction of indicators and the construction of new indicators using cross—market data that I was able to more deeply and comprehensively understand the fundamental factors which appear to influence each market. And I do not mean fundamental in the sense of balance sheets and asset valuation (which in my view is deeply flawed, obsolete, invalid, untimely and ultimately, led by the technicals in any event), I mean in those genuinely fundamental structures which underlie and give tangible form to the existence and the manner of utilisation of the markets by the market participants.

all the lyrics were there and the music too.......the audience is listening...........

 

[rathcoole_exile]

Holy Grail

i am so exasperated by all you guys trying to find the "Holy Grail". There is one, and only one indicator that works time after time after time.
I should be charging youse thousands of pounds for these revelations, but like the best anthropological benefactors of Victoriana, I am willing to share my knowledge without charge in the interrest of furthering mankind.
take your Williams %, Mr Bollinger, The Italian Guy, Mr Elliot's Day at the SeaSide and stick them all in a dark closet, never again to see the light of day.
The only leading indicator you'll ever need is this .... if your milkman is on time, go long. if he's late, go short.
of course, the fine art is in defining the parameters of "on-time" and "late". But nobody said you didn't have to contibute SOMETHING to get rich.
Of course those of you, like me, who don't get their milk delivered ever day are f*ck************************************d. I tried it with the water delivery man but got very mixed signals .....

 

[searchlight]

Searchlight, perhaps the wording of my post was unclear. It is not a challenge I am issuing. I am interested in demonstrating to you the basis upon which it is possible to accurately construct a trading position (which will also by definition carry the possibility of recommending criteria under which no active position be held) based purely on the Price, Volume and Time data available from a standard chart. I suggested a cross market set of charts with specific characteristics and with specific reference to a preferred trading timeframe be provided in order for me to carry out that analysis. I would then reverse engineer the analysis to show the complete set of indicators that would have been required to provide a similar confirmation of position. The point being to illustrate the gymnastics required to get from the base data (price, time and volume) to a usable set of indicators and to compare this with the accuracy and simplicity of an analysis made with the base data alone.

You seem to be asking me to provide you with just the end result; a signal, a tip, advice on a specific instrument. That wasn’t my purpose and is not my intent.

If you only want to trade based on someone else’s advice, knowledge, tips or even inside information, then there are abundant opportunities for you to do so. However, if you want to fully comprehend the basis under which you can begin to develop and set about subsequently enhancing your own process and method for a trading system which perfectly fits you and your trading requirements as they both change over time, then I’m happy to assist. As per the original schema.

As for tips, I don’t bet on horses, but if that’s all you want then you an have the 16:15 at Bath today – Up in Arms followed by Snake’s Head followed by Muraco. I have no idea if any of these will run, or if they will even finish or if they will perform as I have just randomly guessed, but if you’re going to make a living on tips, you’re probably as well to bet all you have as I have just suggested – and get it out of your system quickly.

The Degrees
Thank you for your reply.Rather than your wording, english is not being my first language
contributed to misunderstanding on my part. So I will explain what was behind my thinking for my post. I didn't think you were issuing a challenge, but you made a offer and I accepted the challenge of taking your offer.( challenge was for me to face the consequences if recipient didn't like the post. So in that sense it was nothing to do with you.). I thought (wrongly; I accept) that you will take the this current time, will
study past three years (with all the charts you mentioned) and will come to conclusion about cycle of the market currently in and make prediction for the future.( I was secretly hoping some of the traders who uses indicators in their trade will comment on your indicator/s selections.) Incidently; least important part for me was, whether you will get the market direction correct or not. It was utterly irrelevant for my purpose, as i mentioned before it was educational. For your information, I am paper trading only at the moment and pity that you could not hold yourself and let the latter part of your post to degenerate the level it did.
my advise to you(what is worth), next time give your insultee(i hope this word exist, if it wasn't, it is now!!) opportunity to explain him/herself before you dish out.
It may well be that they misunderstood you.
best regards,

 

[ronblack]

Do you think indicators work or do you trade on just price?

My 2 questions to you to see where you're coming from:

Let's assume you're a swing trader. Would you buy stock XXXX with RSI = 97?

Let's assume now you're a long term trend follower. Would you buy the same stock XXXX with the same RSI value? As a matter of fact, would you care about it's RSI value at all?

Ron

 

[Citizen2007]

Hello Degrees,

Thank you for your post. It would be very interesting to see that. I will attach a chart for you to demonstrate what you say. I do believe, from my own experience , that if you can read price and the indicators correctly, then yes, your entry points will not be too far apart.

Thank you

 

[Citizen2007]

Hello Ron,

Not sure if i can answer your question with the answer you expect. I dont actually use RSI, but assuming any indicator, there has to be a top down approach in the ananysis, before a decision could be made. Looking at the indicator on one chart is just following price as opposed to trend.

Not sure about value on RSI, but on some indicators I would because it would be relative to a previous value and this will actually filter out a lot of noise and help immensly with trade timing.



Rhody Trader

I agree with your post . This is a very important point because it is one that many traders fail to grasp - the limitations of the filter. I would assume that most of a traders money is lost during the phases when the filter is outside its limitations and they have been unable to define this action. This is the reason that the same system does not work all the time.

Thank you

 

[timsk]

Hi The degrees,
Your offer is an intriguing one - I'm interested to learn how you cross reference the various charts to arrive at your conclusions. I'll try to provide some charts if no one else steps in ahead of me - although some aren't available within ShareScope and, additionally, in some cases I'm not 100% clear what it is that you require. Perhaps you could clarify please.

1. Your chosen instrument for the trading timeframe in which you have a primary interest.
No problems so far!
2. Your chosen instrument for the next 3 superordinate timeframes to the trading timeframe in which you have a primary interest.
If the primary interest is, say, swing trading with a daily chart, do you require the 2,3 and 4 day charts or weekly, monthly and yearly charts respectively? . . . Or possibly something altogether different?
3. Your chosen instrument for the subordinate timeframe (if applicable – disregard if this is tick) to the trading timeframe in which you have a primary interest.
Hourly, 10 minute or 1 minute - what's your preference?
4. Commodities Index (CRB) Daily chart for 3 years leading to the period in question.
No listing in SS. I can find it in Stock Charts but to view 3 years worth of price action loses all detail. In other words, a line chart would be easier on the eye. This applies to all charts.
5. Gold Daily chart for 3 years leading to the period in question.
As CRB, above.
6. Dollar Daily chart for 3 years leading to the period in question.
As CRB, above.
7. T-Bond Price Daily chart for 3 years leading to the period in question.
Which one(s)?
8. Sector (if chosen instrument constitutes a sector) Daily chart for 3 years leading to the period in question.
Straightforward for the U.K (less so for the U.S.)
9. Market Index (if chosen instrument constitutes an Index) Daily chart for 3 years leading to the period in question.
In the case of searchlight's choice or Cairn Energy, you might regard the market index to be the FTSE 100 or the FTSE 250.
Cheers,
Tim.

 

[TheBramble]

Searchlight – English not being your first language is not my fault nor is the way in which you chose to interpret what I posted. If my response then, or now, seems harsh, that is also your problem not mine. As you indicate you are new to trading let me explain that if you expect political correctness in this field you will be disappointed. If you expect to get a second chance or if you think they/we/I will be easy on you, forget it. It wont happen in the markets and it wont happen with real traders. The business is far too serious to require anything other than being totally direct and completely honest – with yourself and with everyone else. If I misunderstood your post then that problem is yours too. The issue of comprehension of communication is always 100% the responsibility of the communicator – not the person to whom they are attempting to communicate. If you have not got the response you want then you need, if you care to, to put it another way and keep doing so until you do get the response you do want. As a comparison, look at Timsk’s post after yours. He asks questions completely in context with my original intent and doesn’t ask me to just cut to the chase. There’s absolutely no value in being given the end result (as per my horse racing selection yesterday) and quite simply everything to gain in understanding the process of getting to that end result. Don’t mistake my tone for anything other than what it is in reality or project your own stuff onto it either. I wouldn’t be here doing this if I wasn’t willing to help.

Timsk – glad you’re interested. I arrived at my current position through constant and unflagging hard work, infrequent moments of unexpected but blissful inspiration and most importantly, through ongoing and massive doses of support and mentoring from others. What goes around comes around and I’m pleased to be able to pay back (pay forward?) whatever I can. To answer your questions:-

Superordinate – next standard three timeframes up. If you’re trading daily charts, then they are weekly, monthly, quarterly. If you’re trading 5 min charts, then 15 min, 60 min and daily.

Subordinate – nothing to do with my preference, it’s to do with the timeframe of your primary interest. Again the standard timeframes. If you’re trading daily, then the next level down is 60 mins. If you’re trading 5 min charts then it’s 1 min charts. If you’re trading monthly, then it’s the weekly. If you’re trading 1 min – forget it, I don’t do ticks.

CRB/Gold/Dollar – A line chart does not give me high, low and close. Adjust your scale until you get the detail I need.

T-Bond. I can work with whatever you provide, but 10yr would be most useful. Price or Yield.

Sector – interesting comment. Why do you find it easier to find a sector for a UK instrument? What do you think the difference is between an instrument in the US and in the UK?