Why so hard on indicators?

[Thunderdog]

Quote from nononsense:

Hi Thunderdog,

Of course you use arithmetic on price data. (Don't feel bad about not sharing! Nobody shares something that really works).

Coming back to indicators, this is all semantics. In fact I don't like the name indicators at all. However, it all comes to the same thing, once you are using algorithmic procedures to arrive at your trading decisions, you are by necessity dealing with 'decision variables', very complex or very trivial perhaps. It is not important how you label such variables, x, y47, filter23_output or MACD: it comes to exactly the same thing. Some people don't have your talents and have to do with 'canned' variables popularly known as indicators. I don't exclude the possibility for somebody to artfully distill a profitable method out of these canned indicators. They are in essence no different from yours.

Those ridiculous unending threads about trend or not is a pure case in point. Obviously people want to say something about applying arithmetic to price. (Nobody did, unless I missed it!) If you fail to recognize this, you can argue a long time about nothing. Admitting you use crystal balls of rabbit's feet for trend finding doesn't look right at ET!

Be good,
nononsense

Fair enough. But there is no smoothing, and therefore delay, in my own approach. That distinction is meaningful to me. What I use and what you may refer to as an "indicator" (although I choose to refer to it differently) is far more basic than even the simplest canned indicator. I find canned indicators to be somewhat convoluted. Further, they require assumptions (including, but not limited to, a look-back period) that I am not prepared to make.

But at the end of the day, it's whatever works, right?

 

[ptunic]

Quote from makosgu:

EXCELLENT! Any recommendations on where to get this information would be greatly appreciated.

This has been the focus of some of my recent research. For now I am simply logging all intraday data available (including DOM) on the ER2 from my IB feed. I had to custom write a program to use their API to do this. I would like to feed some of this info into my charting as custom "indicators".

-Taric

 

[MAESTRO]

The best indicator is the ticker tape

 

[icarus618]

Quote from nwbprop:

IMO, the market is always oscillating up and down in cycles. An indicator that is in tune with the cycles is extremely useful. The macd is useful if it is in tune with the cycles of the market. Jack has suggested the 5,13,6 macd. IMO, the histogram and 6 ma is of no use to really see what is going on and actually quite confusing. It is more useful to use a 5,13,1 macd or a 5 ema and 13 ema on ones chart. Once you see the oscillations of the market, you should always know where you are. Then, volume is useful for indicating peaks and troughs of cycles and the strength of the new half cycle.

This is just the opinion of a 3 year newb

You know how things sequence. I don't pay attention to the histogram in my data gathering. The convergence, x-over, entwining, going to neutral, divergence, etc. is a slow-motion thing relative to other data. The prior extreme values are a neat aid which I keep in front of me with rays.

There's nothing to be said against being a newb. I consider myself a newb too and am still learning all the time. It's like being a perpetual student, only I'm not paying high tuition to a school (it was fun but I don't miss those days).

Transference of skills is elusive. Sometimes you want things to happen faster than they do. You feel pressure from places within and without and thus might not see things as clearly as, say, if you knew all that you want is available to you. That's all part of growing, isn't it?

Anyway, glad to see you're still around and posting.

 

[nwbprop]

Quote from icarus618:

You feel pressure from places within and without and thus might not see things as clearly as, say, if you knew all that you want is available to you. That's all part of growing, isn't it?

Anyway, glad to see you're still around and posting.

Could you elaborate on this? Not quite sure where you are going with this. Am I off in saying that the market is always in a cycle and the 5,13,1 indicator represents the cycles? Just curious.

Also, in all the things you listed in your sequence list, the divergence is the most important IMO. The possible beginning of a new half cycle. Otherwise, arent we just trending?

 

[Learner]

Quote from MAESTRO:

Any indicator by definition is a simple function of the following type:

Indicator = F( Time, Price, Volume);

So, it does not contain any more information than the raw data. It filters the raw data. The most common mistake that people do is that they think that the indicators will tell them more (add information). So using their interpretation ability people come up with the "MYTH" of the "CRYSTAL BALL" ability of some indicators. Decision making, on another hand, is a totally different story. It uses additional information called "EXPERIENCE" . Use of experience might generate different actions based on observation of the same indicator.

Data is not information, information comes from analysised data. IMHO. Correct analysis based on experience. Experience comes from screen hours or the experienced.

 

[icarus618]

Quote from nwbprop:

Could you elaborate on this? Not quite sure where you are going with this. Am I off in saying that the market is always in a cycle and the 5,13,1 indicator represents the cycles? Just curious.

Also, in all the things you listed in your sequence list, the divergence is the most important IMO. The possible beginning of a new half cycle
Otherwise, arent we just trending?

I was just referring to my experience that skill transference is elusive and stating a possible contributory cause of the elusiveness. It may turn out that most causes lie outside the market. In any case, market change (trend) has structure. This is something that has to be experienced to be understood; you call your experience "cycle", which is fine. You know the settings I use; they are the same as yours except for the MA setting.

Regarding your comment on divergence, you and I share a common experience. We know that change occurs all the time. Usually we are in the midst of it and are carried along. At times the change occurs suddenly and there is a rush. We are in the midst of it and it is a feeling of exhilaration being pushed from behind. (There are others who feel suffocation and are incapacitated by surprise). You name this feeling "important" and have connected it to something you have observed on the MACD part of your screen. Very nice. What's nicer is you know the drill of the sequence to follow.

 

[John47]

the argument that indicators are made up of data already on the screen is true, but the corollary to that is that an indicator is always objective. Not an argument for or against them, just a statement.

They're just a tool. You learn your method from interpreting price/volume, or interpreting an indicator(s). Just different strategies.

 

[pointrunner]

I know that no indicator isn't perfect (just like no price pattern is), and for me money management is a more crucial ingredient for trading success.

Nevertheless, even though I'm well aware of the dangers of relying too much on indicators, I do like them for a few very important reasons (important to me, at least).

For one thing, with indicators I can do a very fast, very extensive database search for stock candidates. It's not the Holy Grail, but it helps focus the playing field very quickly. Take an example of looking for pullbacks in strong trends. Just eyeballing the chart gives me everything I need to know, but using a couple of simple things like a moving average combination and an oscillator can quickly give me a working candidate list to start from.

Second, sure a lot of indicators (like ADX or moving averages) lag. But I don't need them necessarily to get me into the very beginning of a trend (which they won't do anyway). I really like how they can help me find stocks that are already in a strong trend, and then I can take things from there.

Third, I'm one of those people who can get lost among the ticks and lose sight of the trends. Since I began trading I've come to learn a lot about myself -- especially how much I can get shaken out of good trades by worrying too much about letting a small profit go bye bye. Using indicators to help me make exit decisions actually helps me keep my emotions in check and my discipline intact.

To those traders who say all they need are price and volume, and to all those who say most indicators lag, I say that you're absolutely right. For me, though, using indicators as well as price has helped me to be both more profitable and more consistent.

 

[vikana]

I'm not sure I understand the premise of this debate in the first place. An indicator is some sort of calculation on the price series, and maybe related price series. The "indicator" is simply used as a placeholder for the calculation. If the calculation is valuable the indicator is valuable and visa versa.

I don't know how you can create a trading system without applying some sort of math (plus, minus, compare etc). So in the end everything you trade off is some sort of indicator, imo.

That doesn't mean that stoch(), macd etc are valuable always, just that they present a certain picture of history that in some contexts can be valuable.