Are indicators overated?
- Thread starter mounafia
- Start date
Indicators show what prices have done in the past.
There are tens of thousands of instruments including forex, individual stocks/ETFs, eminis & futures, bonds and other financial instruments, around the world. The total trading in all the worlds' market is in the many trillions daily.
I worked for several large institutions. They would have absolutely no problem wiring thousands of instruments into a program, and buy, sell or go flat based on 20-50MACDs or CCIs or other indicators. The indicators are completely predictable and automatable. There is plenty of liquidity.
They do not bother, because indicators have little predictive power. The institutions have more processing power, more knowledge, more programming capability and plenty of market liquidity to do this. It is a myth that little people with limited skills would have any advantage.
you ever work for one?
If yes, you would understand.
If not, the average trader and average IT person at a large institution blows away the average "trader" at home.
By at least 10 to 1.
Institutions don't have any predictive power either unless you're talking about inside information.
I use a few indicators because they are easy to wire into an automated trading system. A system that does have a positive expectancy; but in know way would I say the system has any power of prediction.
*saves this to his collection of great quotes*
I also believe that indicators, for the most part, are simply baggage that confuse trading instead of making it clearer.
I never worked for an institution, but I agree with TraderZones that institutional traders have much more knowledge than the average trader. It would be foolish to believe that inside information is not being spread around in the top echelons of the trading world.
It's a simple pump and dump scheme. Take the ES, for instance. Institutions have inside agents in govt and companies telling them ahead of time (prolly weeks) what the results will most likely be. If mostly positive, institutions start buying little by litte and wait for the exact second the news comes out (to avoid suspicion of insider trading) to then shoot the ES skyward. The media proclaims that the recession is over. The retail fools scramble to get a piece of the action and start buying. The institutions, again through their inside agents, get an idea of what the reports weeks ahead will most likely show. If negative, same story as above, only they sell. Pump and dump, baby. That's the name of the game.
The biggest pump and dump is the analyst upgrades/downgrades. You notice as soon as a charming favorite moves too high, there's analyst downgrades "due to valuation". Give me a break, the market's a freaking auction! Valuation is determined by the auction participants.
And as soon as a stock tanks on fundamentally bad news, then suddenly the previous "strong sell" becomes a hold or a "buy". Oh, what's that? Someone large and powerful still needed to dump a million more shares before price went totally into the toilet...
And as soon as a stock tanks on fundamentally bad news, then suddenly the previous "strong sell" becomes a hold or a "buy". Oh, what's that? Someone large and powerful still needed to dump a million more shares before price went totally into the toilet...
