To what extent do you use indicators?

Quote from whitster:

i don't use any indicators, in the sense of RSI MACD Moving Averages etc

iow, i don't use any indicators that give signals based on analysis of X past price/time events .

part of the reason is that i know that most traders are losers, and most traders are using these types of things. no edge there for me
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I have to agree. I do not use indicators either. tried a lot of them tho.
 
Quote from escape:

yes that is looking for grail

you should stop and find a job
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I have a job. Thanks :)

Quote from Spydertrader:

I use two indicators: Price and Volume.

- Spydertrader
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For the life of me I cannot determine anything from volume.

Sometimes big volume means a trend is starting.

Sometimes it means it's ending.

Sometimes there's huge volume but it's a doji and the market stays level after that.

It seems like big volume tends to come right before the end of a trend on the 2 min intraday charts, but that doesn't happen enough to be a usable trading signal.

And half of the candlestick charts I look at, like today (2/15/07) AMD 2min charts, don't even have shadows or tails or whatever. 90% of them are full rectangles. All the candle patterns I know involve shadows. I only picked AMD randomly cuz that's what I have open in my other monitor.

cm69, I like your posts cuz I feel like we're in the same boat kinda with regard to figuring out what actually works.

edit - there's one candle pattern I seem to keep seeing. It looks like this:

[] [] []
[] []
[]
[]

and the reverse:

[]
[]
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(that's three candles with no shadows)

But what happens after that pattern is never the same, so it's like "oh, there's that pattern" and then something random happens in the next candle so I can't trade off that either.
 
Well cashmoney, you did say, "watch the negative posts roll in."

You didn't quite get Cocaine's point in the top/bottom thread. So let me have a go at it and he can correct me if I'm wrong (then I'll address other things you said).

1. Cocaine said: "Look, I think that you will be profitable at some point. But until then, the advice you give out may not be sound, considering it hasnt worked for you yet. Wait until you have sustained success and then be a nice guy and offer advice. Think of it this way, the more you repeat things that may not be true (trading advice), the more you may believe something that isnt valid. This leads to bad habits and repeated mistakes and these things get ingrained in your routine. If they are wrong to begin w/, you will have a hardtime breaking them."

What he means is that, despite not being able to trade consistently, you are confidently giving out advice based on your experience. But it might be wrong. Worse (for you, not everyone else), when one gives advice one invests in it to some extent so if its wrong then you will find it harder to move past it. So hes saying:

1. Your advice isn't reliable because you don't truly know if it works; and,
2. Giving it may seriously harm your ability to grow as a trader.

OK. Now your other points. "Price only" traders typically haven't become price only because indicators don't agree. That's a dramatic oversimplification of the reasons. My own oversimplification is that PO traders have realised that lots of indicators didn't help them to trade profitably when compared with learning to understand price action, price behaviour patterns and support and resistance.

Indicators may well help you see things (I keep a CCI on one of my charts because it does help me perceive loss of momentum ) but they don't show you something the underlying chart won't/can't - the information is there or the indicator couldn't show it either. Indicators just display some form of mathematical simplification of the price information.

I don't regard mas as indicators (unless one trades their crosses or something). To me they are lazy relaxed trendlines which confirm trend direction and suggest moving support in an ongoing trend. When you reach support or resistance then price action tells you whether to enter or exit.


On a positive note: I like your last paragraph. You're starting to get it and seem to have a lot less indicators than you originally talked about. FWIW I have two mas on my setup chart for support and resistance, two mas on a longer timeframe chart I stand way back and look at when I'm struggling to decide if there is a trend (only opened once or twice a day), and a CCI on my shortest timeframe chart, which I use to fine tune my entries and exit.



Quote from cashmoney69:

IronFist, from now on when I reply to a thread I feel like I'm going to have to warn not just you, but everyone I respond to from now on that because I was not able to turn a net gain last year, that me, responding to this thread is going to somehow ruin your trading career forever...at least thats what many traders on ET would like to think. Watch the negative posts towards me roll in.



I have used many different indicators and still use them today (MFI, ROC, two moving averages 13 SMA, and 21 SMA, and volume). Make sure that you understand the difference between and indicator and an oscillator, even though we use the term "Indicator" to define both, there is a big difference.

When indicators dont agree it can be hard to make a trade, which is why some on ET say they are "price action only" traders, and claim that price is the only thing that matters. I dont disagree, but it's always been my argument that an indicator will help you see things that a simple bar/ candle chart will not.

Here is a daily chart for CAT http://stockcharts.com/h-sc/ui?s=CAT&p=D&yr=0&mn=4&dy=0&id=p40067086478 .. a stock I'm investing in. If I was waiting for a volume spike before entering this "trade", I would have been left behind, but if I bought when the gap rose above my MA's, I'd be in at day one (which is what I did...well..the day after but still). It's not that the volume bar and MA disagree with eachother, it's simply that they mean different things. Understanding that meaning is really the art of using indicators, something I'm still learning as well. I've asked just about all the newb question about indicators too, like "what indicators do most traders use?..what lengths?..on what charts?"..I've realized that a question like that is almost impossible to answer. I will say though that moving averages are the most simple indicators to understand.

cm69
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Quote from Jachyra:




In an odds based business (like trading, poker, or owning a casino or an insurance company) the laws of averages are not the only principles in play. There are also the laws of distribution (or what some people refer to as random walk). This is why if you flip a coin ten times in a row, while we know that theoretically it should come up heads 5 times and tails 5 times, sometimes it may only come up heads 3 times and tails 7 times.....or heads 10 times in a row for that matter. The laws of averages really only begin to become evident as your sample size begins to approach 1,000,000.

From my experience, all the indicators in the world aren't going to get you in a much better situation than A-K vs. an under pair (forgive the poker analogies if you don't play, but its how I think). No matter how you slice it, you're going to be in a coin flip situation, with the indicators helping you to get on the "good side" of the flip (which would be the equivalent of having a pair vs. two over-cards). And its important to remember that having an edge doesn't mean that you're guaranteed to win... it only means that you have a better chance of winning.


I always tell new traders that you shouldn't be any more upset about a losing trade than a casino would be about having to pay out a single bet at the blackjack table. I mean, even if you have a system that you estimate gives you a 70% edge, you're still going to have to book a loss 30% of the time. If you allow yourself to become distraught every time you have to book a losing trade, you're just not going to do very well in this business.
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Print this post out, hang it on your wall and read it every morning until you really believe it. I couldnt have put it any better myself. Brilliant Jachryra.

With 70% winners, that means 30% losers. Thats quite a lot when you think about it. Most people try a new system, works for awhile and then it has a drawdown period, or some consecutive losses. They then move on to something new, thinking it's hopeless and that it will never work. You will continue to do this until you either blow out your account or cant take the pain anymore. The market is designed to do this! There will always be times where you are going to take a loss. Sometimes you may have quite a few in a row or over a small period of time. If your a trader you learn to accept this and embrace it. After a drawdown is the best time to trade because you have the odds in your favour.
 
Quote from kiwi_trader:



when one gives advice one invests in it to some extent so if its wrong then you will find it harder to move past it. So hes saying:

1. Your advice isn't reliable because you don't truly know if it works; and,
2. Giving it may seriously harm your ability to grow as a trader.




On a positive note: I like your last paragraph.
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"when one gives advice one invests in it to some extent so if its wrong then you will find it harder to move past it."

I'm not attacking you, but I would like to know what part of my "advice" was wrong, other than the "price action only" comment.

"1. Your advice isn't reliable because you don't truly know if it works; and,
2. Giving it may seriously harm your ability to grow as a trader."

#1 - You might remember my "mental breakdown from TA" thread a while back?, I dont use anywhere near that many now, and many times I dont even trade from an indicator reading, but use them to confirm a reason to make a trade. I'm starting to trade more off chart patterns and fib retracements more than really anything.

#2 - 90% of the advice I give, I forget anyway over time. I still grow as a trader because I keep a journal which allows me to learn from my mistakes.

"On a positive note: I like your last paragraph. "

thank you.

cm69
 
Quote from IronFist:

:confused:
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Hypothetically, say you have an edge of 70% that when you flip a coin it will be heads. If you flip the coin 7 times and they are all tails. What are the odds that the next flip will be a heads vs being a tails..... The more tails you get the higher the odds the next one will be a heads.
 
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