Actually it's the behavior that has created and continues to create the pattern that illustrates the sentiment. If one trades the pattern alone without considering the behavior that created it, he will likely trade it incorrectly, e.g., the ubiquitous "head and shoulders".
When Indicators Don't Lag
- Thread starter BOC
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Actually it's the behavior that has created and continues to create the pattern that illustrates the sentiment. If one trades the pattern alone without considering the behavior that created it, he will likely trade it incorrectly, e.g., the ubiquitous "head and shoulders".
As you are familiar with TRO's work, he simply uses S/R levels to trade and doesn't use traditional indicators. But his point (video) on dismissing indicators was poorly made and I addressed that in my reply above.
We might agree on one thing: As a programmer, he is at the top of his game and I have tremendous respect for his coding skills.
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Look back to his post:
"When you change the lookback period of historical price (i.e., change the time frame),..."
Time frame. Time frame. One more time. Time Frame.
Get it?
A 14 period RSI on 1 minute chart is very different than one on a 1 hour chart. But the price isn't.
Price is what matters. The rest are squiggly lines.
I am somewhat familiar with what he uses nowadays although I knew of him way back in the 90's when he was still on the TradeStation forum.
He has adapted his approach like many of us that simpler is better.
I saw that video a while back and thought the same - he could of been clearer. I've changed my mind in that regard. Oh well, it is what it is.
BTW the standard settings are only the recommended settings.
Reading is hard.
Do a little sometime.
Romy, it's been my experience that the vast majority of traders here don't know how to use indicators properly. In addition, the traders that claim that price alone is all that is needed are missing the mark as well. You and I have a strong understanding that the correct way to analyze is with indicators and price together. This is the way that the experienced trader can tell which divergences etc will be more likely to be effective. Indicators help me draw a better, more complete picture and give me a better understanding of new or continued momentum which is what you need in order to make money. And the combination gives me info in real time that I can make my decisions on with respect to what is happening at different levels as opposed to trying to plan trades in advance. That is what you need--what is happening now, not why or who or what may happen tomorrow.
Proper use of indicator/price analysis is extremely useful in successful trading. The correct way to use this is to discover reversal of, or continuation of trend on the long term chart, then reversal of, or continuation of trend on the medium term chart, and then see overbought oversold conditions on your smaller term entry/exit chart, with new momentum in the direction of the medium and long term chart trend. This is undeniably the proper way to use the indicator/price combo.
Always use the standard settings on indicators and learn to trade using them that way. They were researched/developed extensively and those are the settings that should be used.Any change of the standard settings is an attempt to curve fit backtesting with an eye on being right all of the time. As we know--trade management is the most important aspect of trading and is largely overlooked as most emphasis is placed on 100% winners.