Why do traders use so many indicators?

These guys use none, the real pros, mostly big boys.
Playing against them is like playing poker in a table where your opponents can see your cards.
The only chance is to design a system, indicator, that works in harmony with their " ladder".
One clue, Stop Run is their favourite, "liquidity pools " as they call them...i.e. retailer stops, sitting ducks.

People want and will choose the easiest/less effort alternative to solve a problem every single time because its the human nature to be like this.. evolution

thats why the slap a couple indicators and just wait for them to tell them "buy here, sell here" a change in color, an arrow, etc and when it doesnt work they slap another on.. and another one, and they "tweek" the settings and well.. you get the point

another problem with "traders" its that they use X indicator and they have absolutely NO IDEA wtf it "measures" in the first place !! for example im going to use RSI so i can know for sure when the market its OverBOUGH or overSOLD (those 2 terms cracks me up and make me cry at the same time) and buy/sell for sure and those levels (lol)

always research what kind of info its giving the indicator you are using.. but FOR REAL, what formula its used to calculate it and the most important thing: its that indicator truly giving you a complementary info to make my desicion easier/more clear?

you dont necessary need to trade completely naked BUT you dont need 100 indicators either; learn to read OHLC, its the foundation of trading.. THEN you can "maybe" use 1 or 2 indis to complement the analisys OR make your life easier even if they could be redudant sometimes (less thinking steps = less chance to make mistakes)

Many traders use many indicators because of fear of losing. Yet having many indicators is no guarantee for success.

KP

I think people tend to believe that proper set of indicators or more indicators will give them advantage of knowing more market elements - i.e. indicators for main trend, indicators for entries, indicators for support and resistance, indicators for sl and tp etc.

Hi Guys,

I beg to differ here. I have been a student around naked trading forums for many years and Captain Jack probably the best naked trader I have ever seen. Here's the thing for me, I don't have the time to sit around charts all day long and analyze let alone predict when reversals could occur. I use indicators to time probable reversals and only get in when the timing is right. Indicators are useful, but should not be seen as a reversal signal only. It should alert you to a probable set up. I cannot see that noobs will ever grasp the concept of naked charts unless they go on advanced trading courses that will cost them money, effort and a lot of time to learn. I hope the agenda here is not to lure traders into crisp clean naked charts?. Naked charts come with a price tag, but even if you know exactly what to look for you need to be dedicated and spend a lot of personal time into analyzing and preparing your charts and be there all the time.

The last thing I must state is that no Ea (Expert advisor) will operate without indicators. I have dedicated many years around indicators that work. With a solid foundation you can build something good, hence the need for indicators in my life.

A little snapshot based on indicators and current open trades.
Cheers.

Following on the ladder of the Big Boys.
The market, if you pay attention, swings between stop-loss orders, liquidity pools, on each and every time frame. That is where the big boys see the orders accumulated sitting.
And that is why some stop run traders are successful, they learn how to spot those levels, and have systems to monitor the reaction to those stop runs, AFTER the run.
The lower the TF, the more difficult to get trapped in a fake move.Which is also difficult for some Big Boys, competing with other Big Boys.
Business as usual, day in day out.

While making this post I was listening to Iron Maiden's, The Number of The Beast. I then started thinking, could I have produced a song called, The Number of The Trade. Things that make you go... hmmmmm.

I used to go to the campus bookstore and buy all the textbooks one semester or one year ahead (after securing the Professor's syllabus). I'd make them part of my routine homework. So, when I finally got to class the next semester or the next year, everything I was reading was in review. It was better than auditing the class and when the Professor's found out what I was doing, they always made time for me during their office hours for questions - even though, technically, I was not yet their student, yet.

Hint: Get ahead of the class young man. You wont regret buying all those books way before you actually need them.

Likewise, your Trading System should be designed to provide you with a slight glimpse of the road to come.

Yes. No blind trading allowed. In fact, it does the exact opposite. The real benefit to a Trading System is its ability to clarify that which seems or appears on basic Price Chart to be unclear. That's what I used to spend a tremendous amount of time figuring out how to design. I already had a good trading system, but it only used D1/W1/MN1 time frames. I wanted more clarity in the lower time frames (M1 through H1) and theorized that those time frames would provide better insight into the trade to come at the larger time frames.

What I ended up getting was a bigger surprise that I did not expect. Not only did I get a Momentum based system, but I also got a Predictive based system just as well. I stumbled over a particular configuration of the system that makes it both Momentum capable and Predictive capable at the same time. After discovering that, I realized that I could do a whole lot more to improve this current version of the system, if given the opportunity.

For now, with the current configuration I use, it is more than adequate for my purposes.


I had a thread on the forum for New Traders that's all about using nothing but a naked Line Chart. I show New Traders how and why to enter what I call RoR (Range Of Risk) Trade set-ups using Price Action alone. It is not optimal, but it works as long as the Trader sticks with the rules and continues entering trades until the primary move of the day emerges. I did not create the thread to show people how they should trade. I created to show that Indicators are not necessary to make decent trades. They won't have Timing, Direction and Probability. But, they will have Magnitude as the primary rule is to never take the trade unless enough D1 Magnitude is available to push the trade into profit (plus any losses that may have accumulated from any RoR Reversals that were sustained).

So, one can trade without Indicators. People have been doing that since before I was born. However, Trading Technology is supposed to provide leverage of the thought process. If Trading Tech hinders the goal of reaching good trades, then the tech needs some work, or the interpretation of what the tech is telling the Trader needs some work - or a combination of both need to be further developed and improved.


When I'm in a production trading mode in a real account, there is absolutely no time when I don't use the System for entry, hold, targeting, reversal and exit. And, that's the main reason behind using a System. The System has to provide reliable information about:

Entry
Hold
Target
Reversal
Exit

If the System is not doing that, then you don't have a System, yet. You have a Method or a Tactic. And, there is nothing wrong with Methods or Tactics, but they are not End-to-End solutions that cover these five (5) requirements. So, one should be able to look at their System and at any point along the way they should know the condition of these five (5) things.

A true Trading System should integrate your thoughts and then present you with an aggregation of those thought in real-time, so that you don't have to clutter your brain trying to keep up with 500+ thoughts in parallel. At this level of trading, you become Systems Driver more than a Trader. You are not really "trading" anymore per se. All the work of "trading" is decision making. You are allowing the System to do that work. That's why you spend years designing it. It does not come overnight.

System design is a career/profession/job. No different than any other career, profession or job. Over time, you learn how to Integrate ideas. It does not come easy at first, but if you are committed to the Craft of Trading, then the technical ideas and concepts start to come together at some point along your journey to becoming a Trading Systems Designer. Trading Systems come together through several distinct phases:

1) Concept Research
2) Indicator Design
3) Systems Integration
4) Testing & Optimization
5) Deployment, Observation & Confirmation (a reaffirmation of #4)

Essentially, these are the core steps I like to follow. This takes years to do, even working Full-Time, 12-18 hours per day. Getting the job done right is no easy task. Most people don't have the level of commitment or the time necessary to do this kind of work. I've spent many workdays over the years pushing through 24 hours up to 41 hours working without sleep. That was in the old days when I was younger. I don't do that anymore because it requires a tremendous level of energy and because I just don't have to anymore. I'm done with that phase of my career.


Not at all. I either place Directional Trades when I have time to manually manage the trade myself. Or, I use what I call a SwapCycle Trade when I can't or don't want to manually manage the trade and when the System tells me that the market is in a SwapCycle condition. If the System tells me that SwapCycle is not likely and I don't have time to manage a Directional Trade, then I simply don't trade. Cash is a very healthy position and I don't take Undefined Risk in my trading.


I'm not a Software Developer. Someone else did the Coding of the System. I'm the creator of the System. I worked with a Developer who coded the system using my design specifications. However, you do have a point and the System is ripe for further development to include a fairly intelligent EA that does some really interesting things with respect to the System output.

I could streamline the System more by aggregating a lot of the output you see in the current version of the Panel. I could design Impedance & Reversal algorithms into the current design to make it more Predictive than it already is via interpretation alone. And, I could design flexible trade execution such that the EA would know when to execute a Directional Trade .vs. when to insert a SwapCycle.

In other words, I could make this proof of concept a lot more intelligent. However, its more than adequate for my purposes in its present proof of concept form and I when I was working with the Developer, I did have that person code a basic SwapCycle EA. So, I can take what the System provides and then manually launch the SwapCycle type of trade and walk away. Or, if I want, I can launch the SwapCycle EA and then manage it manually - if I just feel like doing something that day. Like, if I'm bored or something. Yes, the point is well taken - there is a lot more that can be done. But, I do have some automation right now. Just not full automation.

Here's an example of a SwapCycle Trade taken last night and its results:



The "SwapCost" is something you can think of as "Draw" in a purely Directional Trade. The P/L shows the status of the Cycle so far. The Upside and Downside Profit Potential shows what's possible for net positive profit. I can adjust those targets manually as needed. #Positions Closed shows how many Swaps took place for the entire Cycle. This is not a Directional Trade. This is a Non-Directional Trade. This type of trade is agnostic relative to Direction.

In a SwapCycle, the decision to enter is predicated on a different concept of trading: Inflection. So, if there is enough Inflection in the market, I can enter the SwapCycle and not have to concern myself with Direction. However, there must be adequate Inflection in the market in order for me to use a SwapCycle. The SwapCycle is an EA. So, there is some automation (as I said before), but this is not fully automated at this stage.

Very interesting stuff. If all you are saying is true I would love to see the results of this system long term. See what the ROI of it is on each pair its traded on, how it works etc. As I say I have designed many EA's in the past but the work involved usually outweighed the results, not saying it cannot be profitable but the market is always changing so I have yet to find something robust enough yet. So for now it is just a better use of time to trade manually and move with the market rather than trying to use lightning in a bottle. I am always interested in this topic, and I do agree that augmenting your trading does sound like it can be very useful but I am not 100% sold on it yet.

That being said this thread was started to show that you don't need indicators, not that indicators don't work per se. I see a lot of others posting here that their indicator systems work and make money for them. My first post stated to prove me wrong, post a trade and I will show you the same trade on a naked chart.

The only one to do this so far was JetTrader, but I still do not understand how his system works so I cannot vouch for it, though he does seem to sound like he knows what he is talking about, and we both took that GBPCHF trade so there's that.

Can you predict where a trade will end and reverse?

Thanks for this BTW

That is a question that I'm interested in hearing the answer to as well. There are many factors that go into why you take a trade and/or why to stay in it. It seems that most EA's or indicators focus on the entry side of the trade, and some good ones have a plan of exit. But what about whether or not to stay in the trade long term, where to place stops based on multiple different factors, to use a stop or not etc etc.

It's not as easy as just an entry and exit signal as that most likely will not work long term.

Hi VIP,

I am getting a bit lost here. You have not stated anything about your naked trading method. To start off, do you trade monthly, weekly, daily, 4 hourly or scalpy charts?. I see naked traders book a few pip scalps every day. Ok so you are eluding to longer term trades. To stay in a trade longer or not, and using stops and take profits, but it has nothing to do with your topic, "Why traders use so many indicators". You have jumped from the crux of your trading method to money management.

Hope you can clear my mind more.
Cheers.

Using fewer indicators is best. Below is a video on how to effectively and efficiently combine indicators. Note: I have no financial interest in the presenter neither am I holding him up as a 'guru' to follow.

Trade safe.

KP

Quoting KeenPips

Disliked

Many traders use many indicators because of fear of losing. Yet having many indicators is no guarantee for success. KP

Ignored

Hi Wavegarrick. This thread was not meant to be a discussion about my trading method, I have a separate thread regarding that in the trading systems section. I made this thread to be a discussion about indicators and why or why not they do not work.

Yes, indeed.

I've lived through four (4) distinct and fairly unique professional careers. One of those careers was in the enterprise software industry. I learned just enough about objected oriented programming and procedural programming to do the specific job that I was hired to do. We had developers who worked on the corporate campus at every single software company I worked for. We had QA/QC engineers, programmers, project managers, etc. I was not one of them. I did not need full blown programming skills to be a software systems engineer/consultant in the field. My job was to go into the field and build something for the customer. I needed just enough "code" to be able to modify either a server-side API or a client-side API. The rest involved taking the object model and creating a solution for the customer. I did that on three continents and with 3 different enterprise software companies over the course of about 12 years. That was that last "corporate" job I had before becoming a Trader.

Creating a real Trading System requires a level of coding skill that I just don't have. Period. I just don't have it. Instead, I spent years developing trading skill and systems design skill. That should be no surprise at all, given that I used to be a systems engineer where the job was to design solutions that worked. That provides a natural solutions oriented mindset and a natural systems theory mindset which (IMO) are great mental tools to have when attempting to design and architect an integrated trading system.

Just like the Developer, the Trading Systems Designer spends an inordinate amount of time developing specialized skill, knowledge and expertise - without which (you are correct) you simply cannot do more advanced work. I've seen a number of different highly talented Developers, who struggle (severely) with coding-up an integrated trading system they can rely upon. I've known a number of outstanding Traders, who can't tell you the functional difference between a Client and a Server - let alone actually coding them.

So, yeah. Being a Trading Systems Designer is a thing, just like being a Software Developer is a thing. They are both two different worlds. If you find someone who has both skills to the level of expert, then you have truly found a highly gifted and talented individual. I've only known two individuals who can do both at ruthlessly high levels of effectiveness and both of them are beyond millionaire status as Traders by now. It is a very rare individual who can do both long term. These types of people are not sitting on every street corner of the world. They are rare birds. I'm not one of them.

I can do the design side at a high level, but I will @%$#@!^& up some code if I'm allowed to.


I found out that you can do a lot with MQL, but it requires some fairly sophisticated design work coupled to some equally sophisticated and creative coding to optimize the MQL. Otherwise, a really robust system can cause Metatrader to puke blood and become a memory or CPU soak. But, yes. I would think that in a true OOP development environment and using FIX protocol, you could build anything you want and make it as flexible as needed - including Multi-Broker or Multi-Intermediary connectivity with an organic (automated) back-testing facility.

Of course, the back-testing is highly subjected to the actual data you feed it. I would use it for the sole purpose design optimization and then look for correlated result sets in actual trades taken from the right side of the screen where it truly counts. You can back-test your way into serious trouble, if you are not careful about how you do it.


The real cost is Time. You can innovate your way to a good system with time and a lot of hard (focused) work. Honestly, I've said a dozen times before. I wish Microsoft would build a Traders version of Excel that had reliable real-time streaming capability. I've streamed live market data into Excel before and used DDE in my first successful trading system.

Streaming data into Excel across a large number of complex formulas to produce the kind of output necessary for a robust trading system can cause Excel to lag severely behind the speed of the stream. This takes the system out of sync with the real market causing problems with output delays. Microsoft would need to know this before hand and somehow, through creative problem solving on their side, eliminate the lag caused by robust formulas.

There are plenty of Excel based Trading Systems out there that use RTD. But, when you start putting the hammer down by using multiple time frames and a lot of indicators, the indicator and system metadata that gets spun off of that has its own calculation requirements and the formulas necessary to make all that work are algo and logic intensive in their own right. This slams Excel and makes it unusable.

Of course, Microsoft has spent its time, energy and effort building a new Flight Simulator - which is really cool. I just wish they would spend some of that time, energy and effort creating a Trader's version of Excel. That would open the door to a really cool trading experience for those that already have years of Excel formula experience.

There's a lot of myth in what Market Makers actually do. In Retail FX, you trade within your brokers "liquidity pool" which is private, proprietary and closed in most cases. There is no traditional Time & Sales and no traditional Central Clearing in Retail OTC FX. Most of these brokers use Metatrader because its server-side enables them to run a business model mimicking a dealing desk and they can simultaneously manipulate the price feed in various ways. In stark contrast, a true Agency Only Intermediary has every incentive to keep you trading, so they can collect ongoing commissions in perpetuity. They don't need you to blow your account, because they are not the counter-party in every trade you make. You get true STP with an AOB and you get both plus deep liquidity when that AOB or AOI has genuine PoP relationship(s).

While the "big boys" actually back Retail FX Brokers with credit facility, your trade never sees the light of day on the real Interbank Market (in most cases) and gets B-Booked by the bucket shop who acts are counter-party to your trade. So, terms like STP, ECN, Ladder, etc., don't have the same meaning at that level of intermediary. And, the best way to avoid "Stop Hunting" is to never use a Stop in the first place. Nobody can hunt and kill what does not exist. Moral of that story is to simply not set yourself up as a Duck by using a Stop.

IMO, the real way you know a Trader understands what they are doing and why, is whether or not they deploy a Stop. This gets to the heart of the level of skill, knowledge and expertise the Trader has developed. A script that stops and reverses trade direction is different. But, a flat Stop is a statement about the Trader's need to continuing developing their understanding of both Market Structure and its associated Magnitude. Beyond the Stop, there is a different way to approach the market using what I call a SwapCycle and Inflection (see above post somewhere in this thread).

In fact, it sounds like the perfect title of a book (that I will probably never write): Beyond The Stop.

Which (ironically) is exactly what an Integrated System is supposed to be doing for the Trader. If it does not do that, then it is not a very helpful System.

The term "Indicator" has to be defined clearly before this statement can be evaluated as either being true or false. Not all Indicators are created equal and not all Indicator Integration work has the same goal or net effect. Some Indicators are not capable of 'seeing' what other Indicators are designed naturally to detect. So, if an Indicator sees something that another does not see and that Indicator is Integrated with additional Indicators that also see things other Indicators don't see, that's called an Edge.

The Edge, is what keeps the Trader alive and offers them the opportunity to thrive. Without a statistical Edge, one might as well find another business model to work - as the trading business model will eventually become frustrating while building massive negative psychology that leads to all kinds of misunderstandings about what Technical Trading is all about.