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

[Overnight]

The only predictive indicator is the trader him/herself. If a moving average is showing the bottom of a long range and thus shall historically move up, then TA says that we're going higher. Yet that same TA will not react at all to news until AFTER it has come out.

So while the TA in and of itself says go long, a scandal/issue comes out during off-hours and the trader knows that the news is going to suck hard on next opening. Why? Based upon past experience of how said news will affect a market.

Thus, the trader predicts the right move is to go short. The ineffable quality of judgement cannot be programmed.

A trader is his/her best indicator. The rest are just guidelines. But blind TA can't ever work, because all TA is blinded by the past.

 

[bone]

Well the point is - you need SOME market data reference in order to take on calculated risk in the markets. Everything is lagging. My consciousness is lagging. IBM’s Watson can’t predict the future - but it sure as shit can beat any human alive in a number of games.

 

[lovethetrade]

Indicators don't work because they represent the outcome of market behaviour not the root cause. Causation is more important than outcomes.

 

[IronFist]

In my experience, volume is predictive. I have written code to back test this, and it is profitable. The general rules are:
1. If volume and price are both rising, price is likely to continue rising.
2. If volume and price are both falling, price is likely to turn around.
2. If volume is rising and price is falling, price is likely to continue falling.
3. If volume is falling and price is rising, price is likely to turn around.

I have tested this only on daily bars and 30-minute bars.

My experience suggests the opposite. Expect a PM

 

[lovethetrade]

Indicators don't work because they represent the outcome of market behaviour not the root cause. Causation is more important than outcomes.

Sorry, that should be "causation takes precedence over outcomes".

 

[nickynoes]

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.

 

[Xela]

Define don't work. Does an indicator not work just because the trader using it is losing money?

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.

Some traders obviously have success with indicators that others do not

Indeed.

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.

It can include elements of both of those, but I think more often it's because people with sub-optimal understanding of statistics and probability are attributing to indicators ill-defined "predictive" powers they don't usually have, and/or (all too commonly) they believe that indicator-"signals" will be more profitable if and when they're "confirmed" by additional indicators.

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).

 

[misterkel]

1. If volume and price are both rising, price is likely to continue rising.
2. If volume and price are both falling, price is likely to turn around.
2. If volume is rising and price is falling, price is likely to continue falling.
3. If volume is falling and price is rising, price is likely to turn around.

Nice rule set, but if I may simplify it, it boils down to -
1) rising volume - price continues direction
2) falling volume - price reverses direction

Am I missing anything? I'd like to use this - I've never really traded volume as an indicator, but I'd like to and want to make sure I got it right. I do agree it's got some validity.

However, there are cases of high volume reversals - large stop triggers being the most obvious. How do you deal with that situation? Is it a time-frame issue, where this case happens very quickly, so it would only affect day traders?

 

[misterkel]

My experience suggests the opposite. Expect a PM

Why not have this on-chain? I'd appreciate being able to follow the discussion.
cheers.

 

[nickynoes]

...

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.