When Indicators Don't Lag

[Buy1Sell2]

Somebody said sentiment works in market analysis, well some indicators are pretty good tools for that. Nothing works 100% of the time and indicators only really need to generate around 50% of solid forecasts. Ride them winning trades as long as possible.

They work more than 50% of the time, but one doesn't need 50% winners to be very successful. Indicators are very reliable in entries and exits. Most traders just don't know how to manage trades.

 

[romik]

Pattern trading can be compared to witchcraft, by not believing in it through personal inability doesn't constitute its inexistence.

 

[dbphoenix]

When somebody shows me a thoroughly-tested and consistently-profitable trading plan that is based on either indicators or patterns or both, then I'll have something to investigate. Until then, it's just theory. And isn't particularly helpful. Belief is not pertinent.

 

[Buy1Sell2]

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.

No need to ever change the standard settings on indicators. They are set that way for a reason. Just learn to trade with them that way.

 

[SunTrader]

No need to ever change the standard settings on indicators. They are set that way for a reason. Just learn to trade with them that way.

They didn't say change the settings. They said change the lookback / timeframe.

 

[Buy1Sell2]

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.

Disregard volume in analysis of direction. It's not an important consideration.

 

[Buy1Sell2]

They didn't say change the settings. They said change the lookback / timeframe.

That's a setting.

 

[romik]

I am going to go out on a limb and say that no matter whether it's an indicator or price or order flow, etc. patterns dictate sentiment, the larger the time frame, the bigger the outcome. Only policy interventions or absence of players (liquidity) will negate patterns reinforce positive or negative sentiment. I think we will agree that nobody in their right mind likes to lose money or turn down opportunity to profit, patterns confirm sentiment in a high liquidity free market. That is my belief based on personal experience.

 

[SunTrader]

That's a setting.

Of the chart. Has nothing to do with the indicator. Dumbazz.

 

[Buy1Sell2]

Lookback timeframe is a setting on an indicator. 14 periods on RSI etc.