Why not trade price ?
- Thread starter oddiduro
- Start date
Some people fish with depth finders and others go with what they have learned.
Indicators can assist to see price action that one may not be trained to see, yet, with the naked eye.
If it helps, by all means use it !
Indicators can assist to see price action that one may not be trained to see, yet, with the naked eye.
If it helps, by all means use it !
"price and price alone" is noisy. However you want to define "noise", it's real and it's at best a nuisance in price. If you have a "calibrated eyeball" that can see through the noise, i.e., if you are an expert chart reader, then congratulations. Not everybody has that talent, or that hard-earned skill, or whatever it is. Indicators cut through the learning curve, and some are better than others. I'm not going to invite another argument over which percentage are useful and which aren't. It doesn't matter. The bottom line is: well-designed indicators will decrease noise without losing lots of signal and therefore perform the task that a "calibrated eyeball" will perform. "zerolag" isn't even a secret anymore; look it up.
I suppose most people think of an "indicator" as using price in an attempt to determine the probable direction of a market. However, please remember that not all "indicators" are based upon the underlying price of the market that is being traded.
I have several systems that do not use price at all for entry or reversals of trades. Price is only used for stop and target determination. The entry and reversal is based upon an "indicator" that is derived from another market. In fact the same system can be used on any stock index.
This is exactly how I've been leaning lately. I was using the price line for most decisions anyway, and once I quit watching the other indicators I've had better trades. I use a 30 second delayed price line, that cuts down on the "fake out" moves.
Don-
You can trade price alone, but price alone may mislead you. Consider:
day 1, up 0.50, vol 20,000
day 2, down 0.75, vol 200,000
day 3, up 0.50, vol 15,000
day 4, up 0.50, vol 20,000
By price alone the stock is up 3 days out of 4.
But when volume is considered along with price, the average share is down 0.26. Or, in other words, the price is up over the four days but it is masking distribution.