haub, xxxskier,
You guys asked about indicators that I use ....
I like to use a bare minimum of indicators, and I keep them very simple. Each one I use serves a very specific purpose and there is no overlap. I've taken the time to learn them inside and out. Are there better indicators out there? Probably. Should you immedtiately switch to what I'm using? No - take the time to figure out what you need and what you're comfortable with.
I see some guys with literally 30 different "things" on their screen/charts. How the hell can you possibly assimilate at this data in real-time and make clear decisions? I believe you need to distill trading down to it's form simplest form - the fewer real time decisions you have to make to greater your chance of success.
So here's what I use:
1. Time and Sales window - I filter out < 50 lots. Trades only, not quotes. Ideally, this should be the pit contract (where applicable) if you can afford it. This is the tape. I'm only interested in what the big gus are doing, and I'm looking at what size is trading at the Bid vs the Offer.
2. I have a small 5 min TRIN chart. I'm only interested in the trend (rising or falling), and the absolute level at the extremes - overbought, oversold.
3. On the price chart I use a Keltner channel (20 bar SMA and 2.5 ATR bands). When price is at or outside the bands I know the market is getting stretched. I obviously draw the VA and key levels on the chart and update them everyday.
Below price I have the following studies stacked (not tiled), So I'm only looking at one at a time. Incidentally I use a 5 minute price chart.
4. $TICK - I've explained how I use this already.
5. ADX(14) - For guaging strength of the trend. I usually ignore it until it is > 30.
6. CCI(20) - extremely useful. Serves two purposes - OB/OS +/-200. And most importantly for spotting divergences.
7. Volume - bog standard. Nothing fancy.
8. Bid/Ask Analysis - A neat eSignal study that enables you to monitor volume at the Bid vs the Ask.
9> Onbiously I have a MP chart (add-on) chart open covering the last 3 days.
That's it. As you will have gathered I'm not a scalper and I'm not looking for 1-2 point trades. I'm looking for trade setups of 4 points +. And I want a minimum risk:reward of 1:2.
Now how do I use all this for trade setups. Basically, I have my levels from MP and VP, and I have my initial trading plan mapped out. As you know I like to ship my orders well in advance, entry, stop and target(s), whenever possible. This discipline help you from getting shaken out of a trade. I will work stops and targets during a trade but I rarely pull the plug on a trade altogether. I will wait for several hours for a tagert to be reached if that's what it takes. Often I'll walk away from my screen and do something else while a trade is in progress. Sometimes I'll leave an MOC order and go to bed.
I watch the tape, the $TICK and the B/A analysis closely to get a feel for what the market is doing. I'm also keeping half and eye on the trend in the $TRIN. The other indicators I'm watching every so often to measure how strong the trend is, how over-stretched we are, and if a reversal looks imminent. Divergences between CCI and price are a very powerful signal to watch for.
Trading is a complicated business, It takes a while to learn the ropes. The best overall piece of advice I can offer is look for things that work consistently, distill them into "rules", refine them over time and keep doing them as often as you can.
One point to note I am experiementing with constant volume bars on eSignal as opposed to a 5 minute chart. I much preferred price data in this format when I used Tradestation but I need to satisfy myself they work ok in eSignal before I swap over. If you don't know what I'm talking about do some research.
Hope this diatribe is of some use.
eSignal users - get these efs's from Central.
BidAskAnalysis.efs
KeltnerSMA.efs
SymbolCompareAsNPS2_EFS2.efs
VolumeProfile1.efs
VolumeProfileRealTime.efs
VolumeProfileRealTimeTickData1.efs
VolumeProfileRealTimeCustomeLookback.efs
In order to find these enter the following in Google:
BidAskAnalysis.efs site:esignal.com
(sorry, old habits...)