How to properly use indicators

Hi K,

Please make a small modification to your indicator (only if it is possible & not wasting your time ... ...

*) i want to limit the bars, i mean... just limitng the indicator calculation to take only some bars (lookBackBars) instead of the whole bars on chart ? so it will prevent our MT4 from freezing (big load ) if calling it using iCustom....
*) or any information (links) how to calculate it using ATR, may be ??

thanks in advance for your help

Basically, I don’t use indicators that much rather I prefer trading looking at the chart. But I don’t see the indicators don’t mean indicators are useless. I saw many technical analyzers use indicators and fetch out high return on the market.

I'd definitely look for confirmations and convictions over longer timeframes.
Once you go shorter and shorter timeframes, you can easily get confused and the signals tend to get kinda jittery.
Making it simple is also a golden rule for me. I tend to use indicators one by one, as in, I do not like to create a mess in my chart area where there are like 5 indicators overlaid on top of each other.
If you're gonna use RSI, use RSI, If you want MACD, use MACD. But what I like to do is add them one by one, and see if the signals match up and I can stack them in my favor. If there are 5 indicators I check and 4 of them contribute to my conviction, and one disagrees, I could possibly ignore that one. But that is hard to see If I add all of them to the bottom of the chart at once.
I also like to use two MA's tops. Some people make layers out of them by adding 25-50-100-150-200-250dma's all at once, and try to make something of that, I don't see the point actually. One or two would easily suffice.

I've used Indicators to trade since 2008

I would read Robert Miners Book High Prob trading strats - It is Elliott Wave, but, there's a bigger picture if you sit and think about it, there he tells you how to use Indicators at reversal points - you can then adapt use them to suit your style/preferred method

If you use them [Indicators] blindly, you will go bust, use them wisely and you should prosper unless you mess up the mental side of trading (which most traders do)

In the chart below the CONTEXT/PATTERN of the market WAS

1. UPTREND defined by the SMA's
2. PULLBACK in an uptrend
3. 2RSI <25% oversold

"IF" the pullback was/is genuine, then we should see the continuation of the trend continue (which is exactly what happened)

Ignore the other Indicators - they are used for other types of patterns/market conditions - only the 2RSI is used in this example

The 2RSI WILL pick up EVERY single market cycle going - some of them are tradable and others need to be left alone - your job as a trader if this suits your style is to back test MANUALLY what works and what doesn't.

This is the latest screen shot - this is a live trade and I'm currently trailing up a stop - as you can see barring a gap down event this has easily returned 3R+ profit

If I hadn't of been in this trade, I would have got in on the mini correction a few bars back as that set up one of my other trading methods and ALL the Indicators would have filtered out that trade, as they were all in perfect positions for a price surge

Hi Thtpro

Can you give an example from the daily timeframe down to the 1hr (where i assume you use the RSI2 if there is a pullback and the MAs are in order 10/20/30/50)

Tried to send you a message but you seem to have that disabled (Im in London)

P

Hi Pervaz - you need to "QUOTE" the comment and that way I would have been alerted to your comment - apologies for the delay in replying, I've only just come back to the thread by chance

I turned off PM's as I had one person ask for help, only to throw the help back in my face

The RSI as an Indicator can be adjusted to fit market price cycles - some of them will be perfect, some of them won't be, this is because of what price action is doing - to get the settings correct, find a SIDEWAYS moving price action market and alter the RSI/STOCH/MACD etc etc etc settings to correlate to the up/down price swings and that's your settings going forward - so you could be looking for Elliott Waves or geometrical harmonic structures and have a reversal zone on your charts, and if that reversal zone is correct then price will move and the Indicator will have predicted and confirmed the reversal zone if that makes sense

Obviously this ONLY works AT the reversal zone, so you have to build a strategy of identifying those turning points, you cannot just blindly trade every turn of the Indicator unless you'll go bust

I wouldn't worry about the 50 SMA - its just there for reference - the Important ones are the 10/20/30

I can give you hundreds of examples, here's a few - the time-frame is/will be detailed on the chart itself:








You'll notice that there's a mixture of differing markets - that's because I just sit and wait for PICTURE PERFECT set-ups to appear, on DAILY charts you get a few per month, on 60 min charts a few per week and on 15/5 min charts you get a few per week also etc - I monitor 400 markets for the set-up, some days you get multiple trades, other times you're sat doing nothing

All a trader needs to double their account every year is 2.3R NET profit per week (assuming a 44 week trading year & 1R =1%) - Just 1 picture perfect set-up per week is likely to result in 2.3R profit - to play it safe lets say 2 picture perfect trades per week are required to get 2.3 net R per week

What will happen though is greed will rear its head and a trader will start to chase set-ups and end up with losses by taking less than picture perfect trades

I've just shown LONG only examples - you can reverse the set-up for shorts >75% - I typically trade UK stocks and if the overall trend of the UK markets was DOWN, then I'd be look for shorting opportunities etc

Hope it helps

Just exited this one from this morning

 

1. SMA's move into perfect order DOWNTREND
2. Price moves SIDEWAYS into the 10SMA
3. with 2RSI >75%
4. = Place order to sell 1 pip (+ spread) under the low of the set-up bar (This was the last GREEN bar in the sideways sequence)
5. Place stop 1 pip + spread ABOVE the set-up bar
6. Trail stop down

As you can see, MULTIPLE R profit

I would WATCH and LEARN when its safe to take trend trades using the 2RSI as not every nicely ordered SMA's work out - just because the SMA's are in order, does NOT mean that they are in PERFECT order

PERFECT ORDER = MULTIPLE R profits
SMA in ORDER = 1, couple or a few R profits

But still the 2RSI WILL catch the "bounce" - obviously some bounces are worthwhile and others aren't

The RSI has been out for decades and I'm staggered this isn't a staple trading routine, which could [should] have been discovered decades ago - If you look at Robert Miners book and method, his DTOsc is basically the 2RSI, as EVERY turn on the DTOsc will be matched by the 2RSI (I've tested it)

You can "slow down" the 2RSI by running a 2 - 3 period moving average - Walter Bressert used a 3RSI3 which is a 3 period RSI with a 3 period simple moving average of the 3RSI for his cycle work, then he created a double smoothed stochastics to replace - ALL he was looking for were the cycle turns in price

Hi Thtpro

Thank you for your comment (ive also learnt that quoting a post informs the user) - Today wasnt a good day for my trades was too eager to jump in !!

Perhaps i'll start a journal

Pervaz

Hi - Yeah I jump all over the shop and its much easier if people quote you so it alerts you - I'm not on here that often either as I'm generally not a fan of forums (too many unsavoury ego's thinking they know what's what)

I would study the set-ups - they aren't all the same - Grade them as Grade 1 picture perfect etc - I even allocate different risk amounts depending on the way I grade the possible trade, the more risky and lower graded possibilities result in less money being committed etc

Combine a few complementary ones to confirm signals and avoid cluttering your chart. Understand each indicator's function and backtest them on historical data to evaluate performance. Adjust settings based on current market conditions to enhance effectiveness.

What is the "DTOsc"?

Hi Pray4pips

Its Miners Indicator in his charting software [see below] - its basically a RSI Indicator with a Stochastic indicator of the RSI - You can get just as good results using a normal slow stochastics Indicator [see other Indicator window on the chart]

From my perspective, indicators like the Stochastic Oscillator simply show where the current price stands relative to recent highs and lows—they don't predict trend continuation or reversal on their own. The key is understanding market structure, as CrucialPoint suggests, and using indicators as a tool to gauge momentum, not as direct buy/sell signals. A strong trend can make retracements worthwhile for entries, while fading weak momentum in a strong trend can be a more reliable strategy than overbought/oversold levels.
I agree that moving averages (MA) are particularly useful for determining market structure and filtering out false signals, but it’s important to consider the context—how the price relates to multiple MAs can tell us about trend strength or exhaustion. Using a combination of different timeframes and momentum indicators can give deeper insight into where the market might go next. However, no indicator is foolproof, and understanding the underlying market flow is critical. At the end of the day, it’s about integrating indicators with a broader market understanding, not relying on them alone.

Thank you for the post and the replies. I always had some confusion about how indicators work, but after reading this, I’ve gained a much clearer understanding. I now realize that simply relying on signals is not enough. Indicators are useful for understanding the market's current state, but it's crucial to make decisions based on this information. When the market trend is unclear, blindly following indicator signals can lead to mistakes. I now understand that using indicators effectively requires a solid grasp of market structure.