'No indicators' revisited

[ford]

'No indicators' revisited.

A few of us regulars from the Trade2win chatroom who are thirsty for knowledge and insight, thought it may be a good idea to revive the discussion on trading without indicators, a method that appears to be neglected and shunned in favour of a plethora of casino frontends, that regurgitate potentially useful data full of clues for trades in the form of fancy colours and squiggly patterns when it may not infact be nessesary to do so - simply because we do not open our eyes to the information that price and volume is giving us in its naked form.

Given the direction of some threads, it might be best that the thread is focused upon exchanging ideas and teaching principles with the help of references to charts, rather than a handheld summary of the market day in day out.

To be quite honest I do not know where to begin my study, there are many variables in pure price action that can be analyzed as far as I have so far conceived; size of bars relative to others, volume, timeframe, context, high, low, open, close, entry, exit, risk management and how they all relate to each other. I'm sure there are more that have escaped my eye.

I suppose to start this thread off, I'll post a chart of Thursday the 18th:

Now, it seems to me that trading on price action and taking trades on breaks of Bar highs and lows requires active management of positions to bail out of a trade and reverse or go flat if the break is simply a anomaly in the underlying trend of the price action. The lines in red are examples of what I see as points to short based upon bar lows being violated, but as one can see they are really trades done in vain. Obviously at the time, we don't know whether they are anomalies, or are there signs in previous price and volume that suggest otherwise that I'm not seeing? :cheesy:

From the 'house' perspective, suckering in shorts based upon the bar makes for good fuel to burn, but like I ask.. how do we protect ourselves?

I hope this has got the thread rolling.. I know I have plenty more questions and look forward to hopefully passing on knowledge when I network with more individuals in the future.

 

[oatman]

My first thought is that candlesticks will reveal more info than bars. Additionally, had you considered P&F charts for breakouts/reversals? This can filter the noise depending on your settings.

 

[Bigbusiness]

I prefer the bars. Skimbleshanks had some nice clear charts like that.

 

[bonsai]

Can I suggest that you may need more than just a 1 day chart.

Personally, I use a 3 day chart as well.

I find a slightly bigger picture helps with getting things in perspective.

 

[DaveGos]

A value strategy based on volume and price, see Gray 1's various posts on VWAP, should increase the chances that the break from the bar high or low would be tradeable.

 

[Skimbleshanks]

IMO there's far more information available from bars than candlesticks. The main reason is that when trading price and volume you need to see clearly the tops and bottoms of the bars - when you look at a candles chart your eye is drawn to the 'body' of the candle and the wicks are insignificant.

 

[rossored]

Fordy, I hope that this is the sort of thing you were after when we spoke in the chatroom.

No comments on the daily action required. All the TA speaks for itself fairly loudly. You just need to be able to cut out the noise and do the TA as it occurs. Support, resistance and basic TA patterns all work very well for me. You dont need indicators to tell you what price already tells you. Would the chart below be any clearer with MACD, RSI, EMAs or any other indicators? I think not.

Edit : 5min YM 18/12/03 attached

 

[Skimbleshanks]

A suggestion, if I may. Perhaps we could all agree some consistency to avoid confusion.

How about trying to remember to indicate the timeframe if this is not obvious from the chart (ie 5 min), and to always put the timezone after any times quoted. So 14:30ET, or 19:30UK. I was always taught to work in the market's time, so I always use Eastern Time (ET), but I do realise that others use UK time (not GMT).

 

[Grey1]

Ford,

May I suggest you to start from the study of VOLATILITY . Volatility is root of all evils or mother of all evils.. If we had zero volatility we would have zero risk and zero reward ofcourse..
As trader we can't tame or influence Volatility but we can adjust our position size to control risk and once done that you are on the right direction,,

Your second step should be the study of VOL/Price action. ( price action on its own does not mean much .. A MM can raise the price with not a single share Traded by 50% if he wants do ... This is often done in a strong Bull market @ Open under the name of creating liquidity .


Third step would be to study TA indicators and I suggest to be wary of those which use arbitrary settings to give signals.. by doing that you eliminate 100's indicators in one easy step

 

[twiggytwo]

Hi ford, can you please give us the name of the software you are using for your 10 m. bar chart as it looks to be very clear and I do like the layout with the Time and Day displayed, with regards your thread I think you are correct that we may get bogged down with too much info that may stop us seeing the wood for the trees. Price and Volume with a MAX of 2 indicators as a confirmation may be the way. The 2 indicators to use ? I trade the DOW and use Parabolic and Bollinger, with some small success, with 5 m Bars. Regards Twiglet

 

[oatman]

That's OK Rosso, but when were the lines drawn?

 

[Skimbleshanks]

twiggytwo:

The software is Qcharts from quote.com

 

[twiggytwo]

Thank you Skimbleshanks (Qcharts)
Regards Twiglet

 

[neil]

Would using a higher time frame ( Direction), in conjunction with a lower time frame (execution mode) help?

 

[rossored]

Oatman : the lines were drawn, thanks very much, as the action occured. No, I dont have statements or concrete proof of it, just my word. If people want real time analysis as it occurs, come into the chatroom because I/we havent got time to post on the site intraday. Sometimes I barely have time in the chatroom.

I absolutely knew that this thread would attract criticism - one of the mods warned me about it as well; the constructive variety I can understand, and suggestions are more than welcome in order to assist the learning process. However, if people want to criticise and make yet more pointless, accusing comments, then I will cease to post completely and become yet another lurker.

 

[BBB]

Neat thread!

I try to avoid indicators at all costs with the exception of volatility indicators. For those who do, I wonder why some people use a stack of indicators all showing the same thing - momentum! Stoch's, RSI, MACD blah blah blah. How many times have you seen an indicator reach ob, only to stay there and give constant divergences, only for the trend to continue. As Grey1 hinted at, the parameters for this indicator probably haven't been optimised. Who wants to sit round finding the optimum parameter indicator all morning, only to readjust it next week when conditions/volatility has changed? This separates the analysts from the traders

Neils comment is correct. Take the signal from the longer term chart, trade it on the intermediate term chart, manage it on a short term chart. Well, it helps me anyway!

Do others agree?

 

[ChartMan]

Very little can be learned from posting these things RT... one just gains a bit of Kudos , maybe. The post close analysis allows time for reflection and study that just simply can't be done during trading hours. Learn from the postings as homework, and then learn to apply what you have learnt for yourself in real time and see how it pans out. In my experience, it is only during slack times that one can find the time to do RT postings, and because of the very nature that it is slack, there's not much to deliberate about...
Rosso, I'm sure all contributions, however timed, will be wecomed for what they are by most.

 

[ChartMan]

100% BB.
Even I'm relying less and less on RSI.... and CCI is just a waste of time, almost. I used to think CCI was the Bee's Knees.

 

[Goober]

BBB

I'd agree with your top-down approach. Also, a trader's long-term survival depends on consistent and effective risk management.

Good thread - I look forward to some positive comments and "death to the detractors!"

Happy trading

Goober.

 

[Grey1]

Goober,

Quote " a trader's long-term survival depends on consistent and effective risk management "

Spot on