Are indicators overated?

[FB123]

Indicators can be useful as long as they don't obscure the price action... for example I have found that Bollinger Bands and MAs can be useful if you know how to use them properly. Generally I don't find stochastics or any other oscillators useful in real-time because they can often lie, especially on short range charts... I never want to be using an indicator that can be pointed in the exact opposite direction of price action, and that can happen with oscillators from time to time, which is confusing when you are trying to make fast decisions.

The bottom line is: use whatever you feel comfortable with and don't think that anyone has the magic answer. Understand that indicators aren't going to tell you any secrets that price itself isn't already telling you... they can just be useful as a kind of short-hand in certain situations, as long as they don't cloud the price action itself.

 

[TraderZones]

Quote from cashmoney69:

Indicators get a bad rap because a lot of new traders turn to them in hopes that it will hold their hand to profits.

Indicators get a bad rap because they usually fail to demonstrate any clear outperformance edge under exhaustive testing. They are usually used by people who BELIEVE they work, but have not made a concerted effort to PROVE they work.

If they were reasonably profitable, then the mega-billion research budgets of IBs, hedge funds, large traders and others would have them in their quants rule bases.

If a company could make 20-100% a year trading MACD, ADX, or any other indicator, then we would not constantly having 3/4s of the mutual funds underperforming the indexes such as S&P.

 

[stock_trad3r]

Indicators are worthless when everyone sees the same indicator.

 

[NoDoji]

Quote from TraderZones:

If a company could make 20-100% a year trading MACD, ADX, or any other indicator, then we would not constantly having 3/4s of the mutual funds underperforming the indexes such as S&P.

Indicators are the footprints of what big money has done. Big money can't "day trade" in and out of a position very easily. But if indicators leave big footprints pointing toward the next surge of a rising trend, or pointing toward the exits, short term traders can jump on the back of the runners and go a long way very quickly, thanks to these footprints.

 

[Red_Ink_inc]

The less squiggly lines on the chart the better off you'll be.

 

[melanie911]

Are indicators overated? Y

 

[bighog]

Children use indicators: candy, ice cream wagons chimes coming down the block, a play park, puppies and kittens, wading pools etc.

Young women use indicators: his bank account, his shoe size etc.


Traders use indicators: Price, trend, price, trend, price, and some combine the two for a system.

 

[Michael.jstocks]

from your opening post, shouldn't the quesiton be "Are indicators UNDERrated??"

 

[sosueme]

Quote from NoDoji:

Indicators are the footprints of what big money has done. Big money can't "day trade" in and out of a position very easily. But if indicators leave big footprints pointing toward the next surge of a rising trend, or pointing toward the exits, short term traders can jump on the back of the runners and go a long way very quickly, thanks to these footprints.

Please give an example to back up this statement

sosueme

 

[NoDoji]

Quote from sosueme:

Please give an example to back up this statement

sosueme

I attached a chart of STEC from 7/9 with a couple of trades I took to the short side (I sadly have a short bias).

But just after 11 a.m. you see large volume buying come in at an intraday support level that held strong 6 times already that morning. A day trader could've had an order prepared in advance at that support level, or jumped in as soon as the buyers pushed price above the previous bar's close. Good for a fast .60-.70 cent gain.

Then at the end of the day (just before the professional money gets back in the game), a day trader could've scalped a very quick .30-.40 cent move on the break out of consolidation, with expectancy to the short side enticing an entry at or just under the 24.00 level, because price action had just left a failed attempt to break through previous resistance and the intraday moving averages.

This is how indicators can point to the likelihood of future moves.

Although I use the moving average almost exclusively now, the volume and stochastics often provide additional confirmation of future price action. You'll notice on this chart that each time the fast stochastic line pivoted from an overbought condition to cross down through the slow line, you had a solid short entry; and vice versa.

In mid-day chop and in a solid trend, stochs are rather worthless.

You have to know when to use these additional squiggly lines, but I agree you don't need them.