Technical Analysis and Common Sense

Originally posted by NihabaAshi


Further...I truly am amazed that your walking around wondering if one indicator is better than another especially since you've been in the business of trading for 16 years.
No, this is not what I am doing at all. I am only trying to get a dialogue going and see if I can learn something....or even if I cannot, maybe someone else will obtain some new knowledge. I thought this site was about the exchange of ideas and information. It seemed lately to have gotten far off that course and more about insults, and complaints of all kinds.

There is no holy grail that I know about.
The stochastics is no better than the MACD. The RSI is no better than the Bollinger Band. Volume indicators are no better than money flow indicators.
I never believed there was a holy grail. Maybe if there were, you could keep it to yourself, but eventually the cat would be let out of the bag by someone somewhere. And we would all be using the same "trick"....and of course, then it wouldn't work anyway. But this has never happened, so common sense leads me to believe that it doesn't exist.


We as traders choose indicators like we choose a mate. There's something about the indicator that's appealing to us when other indicators have no sex appeal. Beauty in the eye of the beholder.
So is this your way of saying that TA is SUBJECTIVE?

rs7...once again...no indicator is better than the other, it's what the trader feels about it that decides why he prefers it over another.
Subjective again?

Look at it this way...I love Bollinger Bands, stochastics, volume indicators, exponential price moving averages and Japanese Candlesticks...I feel comfortable with these indicators...they fit my personality.
and yet AGAIN?? (I could do this for the next couple of paragraphs, but I will try to attenuate a bit here)

rs7...now I'm really curious...who is telling you that one indicator is better than another...how did that get so deep seated into your thoughts?
Actually no one......I just got to wondering when SuperEgo was virtually SHOUTING that to be successful, you had to use his screen setup EXACTLY....so obviously, he for one, felt there was ONE WAY to get to the "Holy Grail"...I don't think I need to state here what I thought of him or his system, but it got me thinking just the same, because so many of his fans were all ears. Were they just desperate losers? Or is there really some kind of consistency that works? As I said, I just am curious, and open to new ideas.

rs7...you have been successful at trading for 16 years...why do you want to jump ship and put aside what has gotten you this far to test and try to apply something you have doubts, skeptism about?
I do not want to jump ship. I only want to be open to fresh ideas. This is not to say I will ever implement them, or that I will not. I just see no harm in "knowing" about them.

Let me ask you this question..... (for the sake of brevity, you ask about different people having different results with different indicators...sorry for the editing)
Which indicator is better?
Again, this makes it all seem very subjective to me.

Or do you think it was the application (trade methodology) of a discretionary trader that made the difference?
Yes, I do. Which is what I have maintained all along!

To sum it up...stick with what you know best and try hard to not dwell on things you have doubts about.
I have, and I intend to stay with what has worked. I do not see this a "dwelling on things I have doubts about"...I just see it as trying to broaden my horizens. I have been wrong about many things in my life. What if I am wrong about this? Maybe I can be more successful than I have been! Is there any harm in what I have tried to do here? I don't think so. Maybe I will not gain anything from this, but maybe someone else will. Where is the downside?

PS: Do you think a trader that earns 105k per year is successful? Or did you mean to write "per month"?

Thank you for the response. I did find it very thought provoking.
Keep 'em coming!

RS7

PPS: rs7...You need to give the Superego thing a rest and move on.
Gladly, if you can give me a better example to use! I just like to use him, because he just took my counterpoint to such an extreme.
More...
 
Dblarrow,

I looked at that picture and I just didn't see a good enough correllation to make me want to bet money. For me, it is just too noisy. But that is just my perspective, I'm not presenting it as a fact.
 
Originally posted by dotslashfuture
I think this is what RS7 had in mind when he started this thread: "Does technical analysis work for daytrading?"

I am not an expert on daytrading, and the main reason is that I have not been able to discover any technical analysis tool that is valid for time frames shorter than an hour. When you get that short term, it all starts to break down and it starts to look like betting on coin flips.

Also, I have not found that the mathematically derived indicators like stochastics and MACD are valid for intraday timeframes at all, even though I think they work well on daily charts.
More...


I have to agree with DblArrow, Dotslash...

Here's a couple of examples to clarify my opinion. The first
chart is a daily of the S&P with a stochastic slow D (14)
layed over.

One of my favorite signals is a Convergence/Divergence
of stochastic for buy and sells.


For those of you not familiar with this:

1. A divergence is when price makes a higher high and
stochastic makes a lower high.

2. A convergence is when price makes a lower low and
stochastic makes a higher low.


The second chart is a 100 tick chart of the ES emini with
a stochastic slow D (14) layed over, also. As you can see,
the signals a very similiar.
 

Attachments

ok, the first chart was a daily chart, and it looked great to me, that is the kind of thing I am using now.

Tick charts are not something I have ever used before. In your experience what is the main difference between using a tick chart and say a 1 minute bar chart ?
 
Originally posted by dotslashfuture
ok, the first chart was a daily chart, and it looked great to me, that is the kind of thing I am using now.

Tick charts are not something I have ever used before. In your experience what is the main difference between using a tick chart and say a 1 minute bar chart ?
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The reason I like to use a 100 tick chart instead of 1 minute
or 3 minute is this:


Say the market gets real active and I get 5 or 6
hundred ticks in a minutes time.

On a 1 minute chart, I get a very "long" bar that is
difficult to trade. It makes choosing my stop a little
harder, and it distorts my indicators, somewhat.



With a 100 tick chart, I get 5 or 6 "Bars" which makes
it easier for me to place a close stop in a logical place, and
my chart is "smoother" so to speak. So, my indicators don't
jump around as much.


It's kind of hard to explain in words...lol

Hope this helps.
 
hey, that's cool, that makes sense. It seems to take some of the noise out of the stochastic as well, at least in that example. Thanks. Unfortunately my software doesn't provide tick charts, I'm using an inexpensive retail oriented program. What software do you use ?
 
I have only been trading for 4 years yet for a good part of the first 3 years or so, I did a lot of work with indicators. I got so good at knowing their behavior characteristics that I could take a chart and hand draw on a piece of paper how the MACD looked, Stochastics and ADX. I could also do it backwards, draw a general chart by using the indicators. I even went so far in Real Tick as to use a table format with their charts rather than the actually chart.

My point is none of these indicators really work unless you have hard and fast rules for using them. They all will behave generally the same because they all act on the same input, which of course is price.

Having said that, the one tool that I have found beneifical in daytrading is the Relative Strength Index. Generally speaking, you can buy pivot lows when the RSI 14 > 50 and sell them when they are less than 50. I also use volume which is just as important.

Getting into any trade, no matter what the criteria for entry is, is the easy part. Hard part is getting out. That is where the rule setting comes in to play. I suggest anyone interested in setting rules for profit objectives and initial stops using any indicator look to the ATR (average true range) for clues.

John
 
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