What's the best indicator?

[PitchBlack]

Quote from azmi:

I read portions of Quantitative Trading Strategies by Lars Kestner where he backtests all the popular TA signals like RSI, STochs, MACD, BOllingers etc etc....over the past 20 years on the S&p 500 futures contracts....NONE of them gave positive results aside for the MACD and some other combination of indicators which were too complicated for me to understand.

This confirms what i always knew: none of all the indicators, that are given away for free, work good enough in the long term.
The real stuff that works will never be published until...........the day this stuff doesn't work anymore either. But at that moment these indicators will be sold as black boxes with the old track record as prove of the past performance.

The real importance of the added clause "past performance is no guarantee for future performance" will become clear once you have paid a few thousand dollars for something that, after a few months, will prove that it doesn't work.

 

[alesund]

Would it be possible to trade with no indicator and just trade by what you see forming on a 1 minute and 5 minute candle chart.

Of course is that possible. Trading is money managment not more not less.

It is all about how you handle your positions if you are on the right side as well as you handle your postions if you are losing.

 

[cnms2]

I agree. Also: the more complicated the indicator mix, the more likely it won't work in the future because it was a curve fit.

Quote from spike500:

This confirms what i always knew: none of all the indicators, that are given away for free, work good enough in the long term.
The real stuff that works will never be published until...........the day this stuff doesn't work anymore either. But at that moment these indicators will be sold as black boxes with the old track record as prove of the past performance.

The real importance of the added clause "past performance is no guarantee for future performance" will become clear once you have paid a few thousand dollars for something that, after a few months, will prove that it doesn't work.

 

[cnms2]

I value and apply money management, but I wouldn't go as far with its importance as you did.

Observing good trading money management is like having a business with good accounting. You still need a good product to sell. You need both ingredients to have a successful business, and make money.

Quote from alesund:

Would it be possible to trade with no indicator and just trade by what you see forming on a 1 minute and 5 minute candle chart.

Of course is that possible. Trading is money management not more not less.

It is all about how you handle your positions if you are on the right side as well as you handle your potions if you are losing.

 

[All-TA-Ray]

Yes, of course it is possible, and all of us are forced to do so if we want to trade the first 5 to 30 minutes of each day. The first hour often establishes the high and low of the day, and moves enough to give good day trades. That time is a glitch in all the indicators that use sampling or smoothing, and trades too fast to follow most indicator signals.

To deal with it properly, you need to know:
1. The short term trend going into the day.
2. The futures activity before the open.
3. How the foreign markets traded overnight.
4. The support and resistance levels of the previous afternoon.
5. The high and low of the previous day.
6. The pivot point, (H+L+C)/3, of the previous day. (Almost always trades through it.)
7. The pivot point support and resistance levels.
8. The expected range for the day (ATR or some such).
9. How to trade opening range breakout.
10. Bollinger band levels.
Other traders may add some more, but these are the ones I use. Ask me if you want to know more about any of them.

I've tried to trade 1 or 5 minute charts all day at times, but the many whipsaws tend to be frustrating, and at other times it is boring. Bollinger bands are so helpful on the 5 minute later in the day, that I won't look at a 5 minute chart without them. If you want to trade only patterns, the daily or hourly chart is better in my opinion.

Chart patterns are what traders watch for who use bar or candlestick charts without indicators. Dan Zanger holds the all-time performance record for stock trading. He turned $11,000 into $42 million in 23 months in the bull market of the late 90’s. Dan uses no indicators. He simply relies on chart patterns, price, and volume. He does not scan for the patterns either, but simply looks at the daily bar charts of 1300 stocks daily. He publishes an advisory service at www.ChartPattern.com for only $69 per month. I have no interest, monetary or otherwise, in providing this information.

Candlestick analysis comes from the Japanese and trades based on more short term patterns than western chart patterns. They have many names for one to five day patterns, and a probability for what follows each. I read a book on them and use them when I see the patterns. Stockcharts.com can search for point and figure and candlestick patterns as well as indicators.

 

[hcour]

What's the best indicator or technical analysis to look at before getting into a trade?

What's the most obvious, ridiculously generalized, impossible-to-answer question to ask to start a thread that goes absolutely nowhere (though certainly not for lack of effort)?

Next serious query, to be found in chat-chat: Which is the Best Religion to find the True God?

I swear, sometimes ET is like a shark feeding on itself just to keep going. Let's all hear ourselves think. Noob Beware.

Sorry, bud, but this is a lazy, inept question, and is utterly meaningless. I'm sure there are great, insightful responses here but because the subject is so broad it can only get you a thousand different paths to the one true glory.

Find an indicator, try to determine how it works relative to price, then ask a question about that specific indicator in respect to the specific circumstances on your chart. Then you'll have a real thread. This one is masturbation...

H

 

[cnms2]

You probably heard about brain storming. Sometimes a stupid question can trigger a great idea in an educated mind. Don't be so harsh: the whole ET (as well as all the forums I've ever read) is full of irrelevant posts, but you can find a few gems too, and it's worth looking for them.

"What's the best indicator?" was a call for discussion, and I'm sure its author didn't expect to get more than divergent personal opinions.

Quote from hcour:

What's the most obvious, ridiculously generalized, impossible-to-answer question to ask to start a thread that goes absolutely nowhere (though certainly not for lack of effort)?

Next serious query, to be found in chat-chat: Which is the Best Religion to find the True God?

I swear, sometimes ET is like a shark feeding on itself just to keep going. Let's all hear ourselves think. Noob Beware.

Sorry, bud, but this is a lazy, inept question, and is utterly meaningless. I'm sure there are great, insightful responses here but because the subject is so broad it can only get you a thousand different paths to the one true glory.

Find an indicator, try to determine how it works relative to price, then ask a question about that specific indicator in respect to the specific circumstances on your chart. Then you'll have a real thread. This one is masturbation...

H

 

[jzlucas]

PRICE.

1. Spot an uptrend
2. Buy a dip
3. Sell when uptrend ends.

 

[dac8555]

Quote from cashmoney69:

speaking of indicators:

can someone help me make sense of the bollinger bands on this chart:

http://finance.yahoo.com/q/ta?s=MSFT&t=1d&l=on&z=m&q=c&p=b&a=&c=

i know what a bollinger band IS, but I cant make sense of these squigly lines.

also what ma's are best for swing trades?

- nate

1. bollinger bands are based on all prices returning and flutuating around their moving averages.
2. the basic principal is that given a set time period (i think 20 days is the default) but you can adjust it. if the price is more than 2 standard deviations from the moving average, the odds are hight that it will try to return to the moving average. therefore, if it extends outside the bands, it is a trigger to buy or sell.
3. It doesnt work very often. only certain instruments during certain periods of time will presond correctly to this signal alone.
4. It is not bad to use along with other indicators as confirmation, maybe use it in conjunction with stochastics.
5. MA's are also different depending on the instument. I spens all day analyzing which MAs behave well with different instuments...doesnt always work. i would say stay simple and use a 55 day or 200 day break/up or break/down with a tight stop loss.

 

[maxpi]

Quote from alesund:

Would it be possible to trade with no indicator and just trade by what you see forming on a 1 minute and 5 minute candle chart.

Of course is that possible. Trading is money managment not more not less.

It is all about how you handle your positions if you are on the right side as well as you handle your postions if you are losing.

I believe that you need to have a statistical idea of win% vs lose% and win/loss ratio before you can apply money management, no? How do you know how much to put on a position before you start the trade if you don't know those things?