the reason indicators don't work isn't because they're lagging

[1a2b3cppp]

Some people seem to imagine that, or something very close to it, certainly.

The reality is that they all "work" in the sense of displaying what their instructions tell them to display; how one chooses to use that information is, of course, another matter.

Correct.

Maybe I should say indicators serve no purpose to traders who want to be profitable. You might as well just enter randomly.

That last assumption typically rests on several misleading and inaccurate beliefs, some of which boil down to an often-subconscious (but very deeply held) and flawed assumption that higher win-rates are necessarily and intrinsically more profitable than lower win-rates. In practice, this problem tends to be exacerbated by the reality that those subscribing most firmly to this "theory" are also usually the least willing to examine the evidence to the contrary (Michael Shermer has written a lot about this).

You might be right seriously, but the problem with reduced win rate systems, aside from the fact that trend trading blows, makes you have to take every trade because if you happen to miss a big winner, you're going to have a lot more losses until you get that one big winner again. Moreover, if your win rate sucks that much, your method of entry sucks, which means you might want to examine some things.

Ok listen, if I was playing roulette and could only bet on one number at a time although it paid 100:1, yes I would play all day. Low number but big winners.

Trend trading is the worst, especially considering massive players just average in until it finally goes in their favor. Which is why it has been said there are exactly 3 edges in trading, arbitrage, pairs trading, and big buying power. Oh, HFT possibly.

 

[Xela]

Maybe I should say indicators serve no purpose to traders who want to be profitable. You might as well just enter randomly.

I trade without indicators, myself (and have done so for years, as both an independent and an institutional trader), but even I still think that statement's very misguided and mistaken.

I also have many colleagues who trade with indicators who think the same.

And so, I know, do countless other financial institutions.

So I'm sure you'll understand, in those circumstances, that to me that comes across simply as a prejudice.

the problem with reduced win rate systems ... makes you have to take every trade because if you happen to miss a big winner, you're going to have a lot more losses until you get that one big winner again.

That's true, and so is the fact that the lower the win-rate, the less likely it is that that would be the trade you'd "happen to miss". More to the point, though, is the reality that if you're comparing one trading method with another, you naturally compare them on the basis of including every trade of each method.

Moreover, if your win rate sucks that much, your method of entry sucks

That's a circular argument.

Not only isn't it correct, but it isn't even logically valid.

Whether low win rates "suck" is the issue you're (purportedly) adducing it to determine.

Ok listen, if I was playing roulette and could only bet on one number at a time although it paid 100:1, yes I would play all day. Low number but big winners.

We agree about that (and it illustrates by analogy exactly the point underlying what I said above).

Trend trading is the worst

There's a large number of members here (of whom I happen to be one) making our full-time livings rather consistently from trend trading (some for years and others for decades), so we'll have to continue disagreeing about that one.

 

[1a2b3cppp]

Define don't work. Does an indicator not work just because the trader using it is losing money? Some traders obviously have success with indicators that others do not, so I would say that the reason indicators don't work for some people is probably because they are worse at risk management or use a position sizing strategy that doesn't mix well with the expectancy of the traders usage of the indicator.

Saying some traders make money with indicators is like saying some people who go to casinos make money with systems.

They might; it's not dependable.

 

[1a2b3cppp]

Agreed, broadly speaking I guess you could state that indicators 'don't work' because the trader using them just doesn't know how to use them correctly. What has lead to the trader not using it correctly could be an infinite combination of things really, since every trader is a unique composition of psychological issues.

So that's like saying you lost money in craps because you didn't use your system right.

No.

This is always the excuse. It's not really feasible that there are indicators that work except the overwhelming majority of traders just don't know how to use them. THis is how trading books get written, by the way, just blame it on psychology. I just told you how to write a trading manual. PM me for paypal address.

 

[1a2b3cppp]

Do remember, a lot of indicators don't work 100% for trading is because the markets a rigged in favour of the banks and institutions, they want you to use indicators like the holy grail as they know technicals are not much good UNLESS you use them in conjunction with fundamental analysis.

Yeah, most probably the funds care about little traders and are trying to make money from them...

This is rigged in favor of them because of account size and access to information. Give me someone with a $800,000,000 account and I'll show you someone who may make money averaging down.

 

[1a2b3cppp]

When an indicator doesn't earn money in the long run, which you define as having no edge, is that the fault of the indicator itself or the traders application of it?

Long term proftiability has much less to do with the indicator you use to make entries and exits and more to do with position sizing and risk management.

Oh for shit's sake, yes, blame the indicator, the trader is probably an idiot, too, but the indicator wasn't going to work anyway.

Posters here have tested this numerous times. Take any indicator. Take whatever signal you want. It's the same as flipping a coin. Sometimes the long signal shows you a huge trend. Sometimes it reverses. Whatever.

 

[1a2b3cppp]

What about a thread "The reason indicators dont work: Stochastics - A Case Study."

That way we can discuss it in detail without the generalisations and look specifically at what Stochastics does, how it is correctly used and why it doesn't work.

I would be happy to do this.

All stochastic does is show you how high price is compared to where it was a specific number of bars ago. Useless.

Go long when it's overbought and sometimes you'll make money. Go long when it's oversold and sometimes you make money. What's amusing is the gurus will say "sometimes overbought means the trend is strong and you may think about going long." Fuck you guru. Because the alternative is "overbought means you should think about shorting." You just said it the other way. Fuck you and your stupid book. They just stick ambiguity everywhere so they're never wrong.

 

[nickynoes]

So that's like saying you lost money in craps because you didn't use your system right.

No.

This is always the excuse. It's not really feasible that there are indicators that work except the overwhelming majority of traders just don't know how to use them. THis is how trading books get written, by the way, just blame it on psychology. I just told you how to write a trading manual. PM me for paypal address.

The reason the majority fail at trading is simply because it is a difficult, crowded professionals where you from the start til finish compete against others that have far more experience and resources than you do.

Saying indictators don't work because the majority of people can't earn money using them long term is like saying the reason most basketball players aren't NBA professionals is because the ball doesn't work. Some people just spend more time stuying and practing and/or are naturally gifted.

 

[1a2b3cppp]

@Xela you are becoming one of my favorite posters. We might not agree although you can present your ideas in a way that is enjoyable.

I trade without indicators, myself (and have done so for years, as both an independent and an institutional trader), but even I still think that statement's very misguided and mistaken.

I also have many colleagues who trade with indicators who think the same.

Not the regular indicators that we're talking about in this thread.

And so, I know, do countless other financial institutions.

Hugely disagree.

That's true, and so is the fact that the lower the win-rate, the less likely it is that that would be the trade you'd "happen to miss". More to the point, though, is the reality that if you're comparing one trading method with another, you naturally compare them on the basis of including every trade of each method.

I know what you're saying. I was not complete in my post.

That's a circular argument.

Not only isn't it correct, but it isn't even logically valid.

Whether low win rates "suck" is the issue you're (purportedly) adducing it to determine.

We agree about that (and it illustrates by analogy exactly the point underlying what I said above).

There's a large number of members here (of whom I happen to be one) making our full-time livings rather consistently from trend trading (some for years and others for decades), so we'll have to continue disagreeing about that one.

Strongly disagree it's a large number of people. Seriously probably less than 10.

I believe trend trading is possible. I do not believe the methods to do are are freely discussed on forums. I do not believe they involve indicators. Actually, I should say price based indicators. Here, I will be more clear. I do not believe that trend traders make money by joining an ongoing trend. I believe they buy bottoms and hold on as opposed to exiting early. This forum has already demonstrated that it does not understand the concepts by which a trend is identified. I don't care about your method for determining a trend, I mean there was a thread where people disagreed that there is a moment where you can say "now there is a trend and one bar ago there was not." Seriously, that is required to have a trend to buy or sell.

 

[nickynoes]

Saying some traders make money with indicators is like saying some people who go to casinos make money with systems.

They might; it's not dependable.

No because it is quite easy to google succesful traders who have over the long term made money using indicators. Indicators are not primarily the cause of why they are succesful.

Just go read Market Wizards.