After reading a healthy debate on "Why indicators will fail you" thread by Steelhead, I felt that it is only fair to have a discussion on how indicators such as Stochs, MACD or CCI are going to help a trader.
I am from the PA school of thought too, however I have used indicators, particularly Stochastics to assit in my timing. I belief most people who find indicators failing them are mainly due to faulty interpretation.
Heres how I to use overbought oversold indicators :
1. I only take buy signals on a up trend and sell signals on a down trend. The most dangerous temptation for newbies especially is to attempt to "capitalize" on every swing of the price.
2. Divergences provide a good indication for potential tops and bottoms. They are also indicative of a strength of a price movement. Divergences are also useful for filtering out what would be a knee jerk type of price action.
Simple as that, nothing fancy. Thats how I use my Stochs, its nothing new and has proven its worth.
Fellow forumers who had successes with indicators please share your ideas and thoughts.
I am from the PA school of thought too, however I have used indicators, particularly Stochastics to assit in my timing. I belief most people who find indicators failing them are mainly due to faulty interpretation.
Heres how I to use overbought oversold indicators :
1. I only take buy signals on a up trend and sell signals on a down trend. The most dangerous temptation for newbies especially is to attempt to "capitalize" on every swing of the price.
2. Divergences provide a good indication for potential tops and bottoms. They are also indicative of a strength of a price movement. Divergences are also useful for filtering out what would be a knee jerk type of price action.
Simple as that, nothing fancy. Thats how I use my Stochs, its nothing new and has proven its worth.
Fellow forumers who had successes with indicators please share your ideas and thoughts.
