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

[1a2b3cppp]

I'd word it slightly differently (but that may be partly just me being pedantic): I'd say "If you add them to your charts and just do as the widespread, generally accepted directions say, you won't make money from that alone".

Wow, everyone in here is drinking the koolaid hard. Not just you.

Occam's razor. Either most indicators were invented and given conditions for use and they don't work, OR they were invented, have an actual way of using them, but then the public was told something else.

Don't joke around. People know how MACD is used. Change from positive to negative, divergence, line crosses, anything. None of these definitely work. So when they don't work they give many different methods to use them. Because they don't want people to be mad they paid for something that doesn't work.

Stochastic. Trade when the line crosses. Or when it gets into overbought. These don't work. Many can't even agree on how to use them. Makes it seem like these indicators don't work.

My point is that indicators don't work because price is here and some bars ago it was there is not predictive of anything. That's the style in which indicators work no matter which one you display. Except for like volume at bid, volume at ask, which also doesn't do anything. @IronFist turned this into a predictive image years ago in some forum which basically became like a moving average. The same person did publish a system here (for free) which he said turned profitable using moving averages but there was some other stuff involved.

Why would there be widespread, generally accepted directions?

 

[nickynoes]

Wow, everyone in here is drinking the koolaid hard. Not just you.

Occam's razor. Either most indicators were invented and given conditions for use and they don't work, OR they were invented, have an actual way of using them, but then the public was told something else.

Don't joke around. People know how MACD is used. Change from positive to negative, divergence, line crosses, anything. None of these definitely work. So when they don't work they give many different methods to use them. Because they don't want people to be mad they paid for something that doesn't work.

Stochastic. Trade when the line crosses. Or when it gets into overbought. These don't work. Many can't even agree on how to use them. Makes it seem like these indicators don't work.

My point is that indicators don't work because price is here and some bars ago it was there is not predictive of anything. That's the style in which indicators work no matter which one you display. Except for like volume at bid, volume at ask, which also doesn't do anything. @IronFist turned this into a predictive image years ago in some forum which basically became like a moving average. The same person did publish a system here (for free) which he said turned profitable using moving averages but there was some other stuff involved.

An indicator doesn't need to tell you the market direction 100% of the time. It only needs to help you recognize setups where, over the long run using decent risk management and position sizing, you will be able to make more money than you bet.

 

[Xela]

Why would there be widespread, generally accepted directions?

There aren't always, perhas, but in practice there's a fairly commonplace tendancy toward the development of widespread, generally accepted directions, partly because of the habit of people posting in forums and on websites and in videos to repeat what other people have been saying (directly or indirectly), and a consensus of opinion gradually evolves, that way (most of which tends to be nonsense, I'd agree).

I'm not for a moment trying to allege that everyday indicators like MACD or Stochastics (or indeed combinations of them) can or will ever make anyone profitable "out of the box".

I'm simply demurring from what I see as your too-dogmatic, too-broad, too-sweeping, too-generalized statements that no indicator, however used, can ever contribute to anyone developing an edge.

 

[misterkel]

I'm simply demurring from what I see as your too-dogmatic, too-broad, too-sweeping, too-generalized statements that no indicator, however used, can ever contribute to anyone developing an edge.

Fair point, but wouldn't it be valid that no indicator can sustain itself? As in, that edge (new indicator or new use of an old one), once discovered by the market in general, will be neutralized as the preponderance of entrants take the position given the same signal? If the edge is strong enough, that would happen. If it's a slight edge, then it sustains. (see - no free lunch).
In other words, indicators can work legitimately, until they don't.

 

[johnnyrock]

Wow, everyone in here is drinking the koolaid hard. Not just you.

Occam's razor. Either most indicators were invented and given conditions for use and they don't work, OR they were invented, have an actual way of using them, but then the public was told something else.

Don't joke around. People know how MACD is used. Change from positive to negative, divergence, line crosses, anything. None of these definitely work. So when they don't work they give many different methods to use them. Because they don't want people to be mad they paid for something that doesn't work.

Stochastic. Trade when the line crosses. Or when it gets into overbought. These don't work. Many can't even agree on how to use them. Makes it seem like these indicators don't work.

My point is that indicators don't work because price is here and some bars ago it was there is not predictive of anything. That's the style in which indicators work no matter which one you display. Except for like volume at bid, volume at ask, which also doesn't do anything. @IronFist turned this into a predictive image years ago in some forum which basically became like a moving average. The same person did publish a system here (for free) which he said turned profitable using moving averages but there was some other stuff involved.

Why would there be widespread, generally accepted directions?

If the market is range bound stochastics will give you a low risk entry point.

If the market is trending MACD will give you a chance to ride the momentum

Traders who can recognize the difference - in real time - could use both effectively. However, the indicator in itself - and the associated triggers for action (overbought, etc.) - has to be put in the overall context of the bigger picture for the time frame you are trading.

The problem, for many of us, is switching gears. My biggest losses - real money - came from shorting a rising market that was overbought and bumping into resistance or going long a falling market that was oversold and near support.

Although the initial entries were low-ish risk, I found myself pulling stops to give the trade room and then the situations got worse because I froze.

So the method was less of a factor than the way I played it.

 

[simbaFX]

Don't joke around. People know how MACD is used. Change from positive to negative, divergence, line crosses, anything. None of these definitely work. So when they don't work they give many different methods to use them. Because they don't want people to be mad they paid for something that doesn't work.

Serious question - what metric are you using to determine if an indicator works ?

From reading your previous posts, I think I probably know the answer, but you might want to re think this and ask the question, "what do I want this indicator to do" and then figure out if the indicator actualy does what you want it to do. "I want this indicator to make money" isnt a useful way of thinking about this problem.

If I had to offer any advice to new traders Id tell them a) indicators dont predict, nor are they meant to, and b) dont use profit or loss as a metric of success or failure about one element of your system or methodology

 

[comagnum]

Indicators work just fine. They are doing the mathematical function they were designed to do.

Now just because someone tries to use the indicators as buy or sell signals and those trades don't work does not mean the indicator failed.

 

[Xela]

Indicators work just fine. They are doing the math function they were designed to do.

Now just because someone tries to use the indicators as buy or sell signals and those trades don't work does not mean the indicator failed.

You have the admirable habit of being able to say neatly in two sentences what I struggle to say in about six rambling paragraphs.

 

[bone]

To some extent, there is nothing new under the sun. A technical indicator is performing a price data statistical sampling function - all wrapped up in a very specific, particular functionality. You can perform those same functions and many, many more using more robust statistical analysis packages like you might find in a MatLab toolbox, or Statistica, S-Plus, etc. etc.

Are correlations an indicator ? Some would argue so. Plenty of traders use correlated lead-lag strategies. For example, you might be able to trade Rio Tinto stock based upon spot physical Gold or Gold Futures. You might be able to trade Canadian Rapeseed (Canola) Oil based upon spot CBOT Soybean Oil futures.

An algorithmic trading strategy will almost certainly require some sort of mathematical rule or condition to be satisfied in order for a trade entry to occur. Isn't that rule or condition by definition an "indicator". Semantically speaking the argument could be made.

Generally speaking, generalities (pun) work quite poorly when it comes to trading markets.

Maybe the better statement is: "why limit the technical indicator realm to the default public offerings" or something of that nature.

 

[Zodiac4u]

Indicators and power tools have a lot in common. They are all energy driven, Job specific and carry their share of limitations and liabilities.

There are added risks associated with the use of these tools. Improper handling or using these tools for jobs that they were not intended be used for, can result in great harm. Be warned, if you are reckless, they will inflict much pain to the user or to his/her personal property.

Consult your user manual before attempting to use these products or contact a professional and have him or her provide you with the necessary training you will need to operate these tools.

Whether your building wealth or building a house, tools can provide you with the help you need.
Zodiac4u