When Indicators Don't Lag

dbphoenix · Mar 23, 2015

Like flu season.

romik · Mar 23, 2015

Indicators always lag, forecasting doesn't change the fact that they are based on price performance.

murray t turtle · Mar 27, 2015

romik said:
Indicators always lag, forecasting doesn't change the fact that they are based on price performance.

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Agreed;
and that doesnt change his points, more than one way to use a moving average indicator.................................................

SunTrader · Mar 28, 2015

Price and indicators can diverge ... and then keep on moving in the same direction. What then?

Or in other words how can you tell this divergence is "the one" to pay attention to?

moonmist · Mar 28, 2015

SunTrader said:
Or in other words how can you tell this divergence is "the one" to pay attention to?

IMHO:

This is a grey area, where experience and screen time would count.

For example, if there is a three-push reversal pattern confirmed by price-momentum and price-volume double divergence on the five-minute chart of ES, under normal circumstances I would look for reversal signal immediately, since ES is a mean-reverting market. The basic assumption is that I trust the momentum indicator producing the divergence signal. What would a trader do, if

a) the volume divergence is missing ?
b) the above divergence pattern occurs on the five-minute chart of gold futures (GC), a running market ?
c) The above divergence pattern occurs five minutes before the announcement of the Fed Fund Rate or release of the monthly job report ?

I guess it all depends on the personality of the trading instrument, time of the day, confluence with other indicators, confluence with psychological levels, support or resistance, time-frame of the divergence signals, etc.

romik · Mar 28, 2015

TA + FA is the best combo IMHO.

Trader13 · Mar 28, 2015

Indicators derived from price always lag. Volume is a coincident indicator. As far as predictive indicators go, the only ones that might qualify are order flow and sentiment.

K-Rock · Mar 28, 2015

Listen to TRO's rhetorical question about indicators:

Trader13 · Mar 28, 2015

I like TRO, he's a character. To answer his question, the indicator is a measure of the current price in the context of historical price. When you change the lookback period of historical price (i.e., change the time frame), the measure changes accordingly. Just that simple.

SunTrader · Mar 28, 2015

Trader13 said:
I like TRO, he's a character. To answer his question, the indicator is a measure of the current price in the context of historical price. When you change the lookback period of historical price (i.e., change the time frame), the measure changes accordingly. Just that simple.

Ponder a little longer.