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Why Indicators will fail you

  • #261
  • Jan 8, 2009 12:08pm Jan 8, 2009 12:08pm
Quoting belekas
Uselles for trading, but are they useless to spot a divergence? A confirmed divergence tells alot if you know how to read it.

Divergence can be spotted just as easy on a naked chart. So yes to me still useless in most instances.

Charts and understanding the market are still more important if you know what to look for
  • #262
  • Jan 8, 2009 2:01pm Jan 8, 2009 2:01pm
Quoting steelhead
Just an update I still think Indicators are useless
I love my mas......

and trendlines..... and channels....and fibs.... and......
Patience + Discipline - Greed = Success
  • #263
  • Jan 8, 2009 2:07pm Jan 8, 2009 2:07pm
In the Jan/Feb 2007 Issue of CFA Magazine, there is an article about a recent study on trends in quantitative investing.
Below are some findings:


Phenomena Being Modeled:

  1. Fund Capacity: 20%
  2. Impact of Trades: 24%
  3. Textual Data: 2%
  4. Higher Moments: 2%
  5. Regime Shifts: 10%
  6. Volatility: 20%
  7. Extreme Events:
  8. Momentum / Reversal: 31%
  9. Trends: 28%

Modeling Methodologies Used:

  1. Shrinkage / Averaging: 9%
  2. Regime Shifting: 4%
  3. Nonlinear: 7%
  4. Contegration: 7%
  5. Cash Flow: 17%
  6. Behavioral: 16%
  7. Momentum / Reversal: 28%
  8. Regression: 36%

As seen in the survey results, trends, momentum,
and reversal models\indicators are possible edge.

forexflash
  • #264
  • Jan 8, 2009 2:09pm Jan 8, 2009 2:09pm
Quoting steelhead
Divergence can be spotted just as easy on a naked chart. So yes to me still useless in most instances.

Charts and understanding the market are still more important if you know what to look for
What I hate the most about this divergence stuff is that every 5 years old can spot it if he has a histroy chart. If it's forming at the moment it's hard to tell when it's completed and when to enter. Maybe I just don't have enough experience to do that but I prefer clear signals. Pinbars etc. Candle closes boom there is the signal and the candle will not change afterwards. How much more do you want?
  • #265
  • Jan 8, 2009 2:14pm Jan 8, 2009 2:14pm
steelhead i do see your point about just using a naked chart instead of indicators. Cause indicators can give you incorrect reading on the market, so what i mean is, they can put an idea in your head about the direction and because your indicator says so then its like it will happen. Then when it dont happen you blame the market or broker or anything other than the indicator.
You obvoisly have somthing good going for you and you dont need indicators, so fair play on that.
Everyone has their own way and method so I just want to clarify on my earlier post I was not having a digg at you or saying that indicators rule, cause they dont.
I do use indicators but not in a sense that any 2,3 or 8 combination of indicators gives me a 'trigger' signal. I think thats where a lot of people go wrong, they read that you shudnt listen to yourself, only to your indicator signals. Even if somthing is telling you not to go with the signal you will follow ur signal generator cause its what everyone seems to say u must do.
For me they give me a weight of evidence on the trade, they dont dictate when i trade.
  • #266
  • Jan 8, 2009 2:18pm Jan 8, 2009 2:18pm
Quoting Tjpld
What I hate the most about this divergence stuff is that every 5 years old can spot it if he has a histroy chart. If it's forming at the moment it's hard to tell when it's completed and when to enter. Maybe I just don't have enough experience to do that but I prefer clear signals. Pinbars etc. Candle closes boom there is the signal and the candle will not change afterwards. How much more do you want?
Moving averages, trendlines and channels give me excellent entries and exit almost everytime. Indicators by themselves are indeed useless.... but if you know how to use them with PRICE ACTION..... you won't regret it....

I use today as a perfect example... I got a 200 pip countertrend trade right at the top because of this chart with lots of confluence..... Surely I would not have gotten such a perfect entry on a naked chart without the trenlines and channels on it....
Attached Image
Patience + Discipline - Greed = Success
  • #267
  • Jan 8, 2009 2:27pm Jan 8, 2009 2:27pm
So where was your entry?

I don't have anything against trendlines or channel even tough I don't use them as everyone draws them differently. A candle is absolute unique and everyone has that same candle on his chart.
I prefer good old horizontal lines and round numbers.

With indicators i mean things like RSI Stochastics and all that none sense.
Everything that takes the close of the last XY bar (everyone uses different settings here) to calculate something that is bounching between -1 and 1.
And if Price is dropping like a stone it will just stay at -1. Wow that gives some great extra info... NOT.
I find it funny when I read some of the trading systems here. The 3th or the 4th reply is always "What timeframe?".
How good is a system if it only works one some specific time frame? That's like learing some tourist spanish which will
get you around sometimes (When you want to order a beer) but most of the time you will not have a clue what the locals are talking about. Because you don't speak REAL spanish. Same with those little indicator systems. Only works when you are in a hotel or at the beach. ^^
  • #268
  • Jan 8, 2009 2:33pm Jan 8, 2009 2:33pm
Very timely advice. I am going more and more to no indicator use on charting packages I look at. Clean and uncluttered approach. The indicators may be more of a distraction for some.

Thanks for the input and am looking forward to specific approaches to take. Although Jacko advocates the 50% level in his teachings.

Thanks!
  • #269
  • Jan 8, 2009 2:34pm Jan 8, 2009 2:34pm
Quoting Tjpld
So where was your entry?

I don't have anything against trendlines or channel even tough I don't use them as everyone draws them differently. A candle is absolute unique and everyone has that same candle on his chart.
I prefer good old horizontal lines and round numbers.

With indicators i mean things like RSI Stochastics and all that none sense.
Everything that takes the close of the last XY bar (everyone uses different settings here) to calculate something that is bounching between -1 and 1.
And if Price is dropping like a stone it will just...
My entry was 5370... Candlestick patterns are what I use to read price action so it is actually the main driver of my system.... but the moving averages, trendlines and channels add another dimension to it... making the system consistently profitable. I am not trying to convince anyone to use indicators but I am just telling you what works for me and some of my friends...
Patience + Discipline - Greed = Success
  • #270
  • Jan 8, 2009 4:37pm Jan 8, 2009 4:37pm
Quoting Infinity
I love my mas......

and trendlines..... and channels....and fibs.... and......


I know you do we have had this conversation before. You know what you are doing
  • #271
  • Jan 8, 2009 8:12pm Jan 8, 2009 8:12pm
Quoting steelhead
I know you do we have had this conversation before. You know what you are doing
I know man... I'm just messing with you....
Patience + Discipline - Greed = Success
  • #272
  • Jan 8, 2009 9:48pm Jan 8, 2009 9:48pm
Quoting Infinity
Moving averages, trendlines and channels give me excellent entries and exit almost everytime. Indicators by themselves are indeed useless.... but if you know how to use them with PRICE ACTION..... you won't regret it....

I use today as a perfect example... I got a 200 pip countertrend trade right at the top because of this chart with lots of confluence..... Surely I would not have gotten such a perfect entry on a naked chart without the trenlines and channels on it....
You got an absolute brilliant entry on that trade, bravo. 20 pip better entry than me and mine was waiting for the confirmation of price action before entry.

Here, it goes back to the key, PRICE ACTION, the ma's add targets from there ie: TP, SL movements, absolute managing your trade.
Just digging in the trenches like everyone else!
  • #273
  • Jan 9, 2009 5:40am Jan 9, 2009 5:40am
Quoting steelhead
Divergence can be spotted just as easy on a naked chart. So yes to me still useless in most instances.

Charts and understanding the market are still more important if you know what to look for
Dont shortcut your answer buddy Divergence tell alot if you know how to read it. Ok let me ask like this - isnt a chart an indicator for itself? If it aint why everyone is using it?

So you say you can trade without one right? So throw your chart at the rubish bin and just use ask/bid price to trade. Can you do that?
  • #274
  • Jan 9, 2009 5:44am Jan 9, 2009 5:44am
I didn't read the whole thread as it's 19 pages
but all I can say is, indicators don't fail us we fail ourselves.
we either expect to much from them ,misread them or haven't bothered to do enough testing to know strengths and weakness of your indicators.

Regards
Enter Signature
  • #275
  • Jan 9, 2009 5:53am Jan 9, 2009 5:53am
Quoting CHFJunkie
I didn't read the whole thread as it's 19 pages
but all I can say is, indicators don't fail us we fail ourselves.
we either expect to much from them ,misread them or haven't bothered to do enough testing to know strengths and weakness of your indicators.

Regards
Thats more like it, though yes i do agree with the thread starter because market conditons change all the time. I prefer to trade current market conditons with lines that describe the balance between sellers and buyers precisely if you know what your doing. Anyway theres no right and wrong here and the final conclusion what matters at the end is - whatever gets you payed. Everyone needs to develop their own style and see what suits their personality. I see people using ma's very sucessfully but myself i was never sucessfull with them, but, that doesnt mean i wont use a few for my own trading in the future. Respect goes to those that push it to the limits as you know when we learn - the sky is the limit! Cheers!
  • #276
  • Jan 9, 2009 8:06am Jan 9, 2009 8:06am
I don't know about price action much. Just the basic of price action. But i've always relied heavily on indicators since I started trading. No problems till now. I don't even know fundamentals that well. I just trade almost purely by technicals... No problems till now.

The only real problem is that I work hard every trade. I can't leave my trade open for long periods of time without monitoring. Makes me want to learn other more simple ways of trading.

But I wholeheartedly disagree that indicators are useless.

PS: I'm a scalper at heart. I've yet to see a scalper who can scalp successfully by price action alone.
  • #277
  • Jan 9, 2009 8:18am Jan 9, 2009 8:18am
Quoting thelws
I don't know about price action much. Just the basic of price action. But i've always relied heavily on indicators since I started trading. No problems till now. I don't even know fundamentals that well. I just trade almost purely by technicals... No problems till now.

The only real problem is that I work hard every trade. I can't leave my trade open for long periods of time without monitoring. Makes me want to learn other more simple ways of trading.

But I wholeheartedly disagree that indicators are useless.

PS: I'm a scalper at heart. I've...
Well there you go your a scalper so it would be harder to rely on price action. Try trading off longer timeframes. As far as messing with a trade enter the trade and walk away give it time to breathe
  • #278
  • Jan 9, 2009 9:54am Jan 9, 2009 9:54am
Yea, I've always wanted to do that. In the end I can't imagine myself working everyday to my millions.

Which is why I'm learning to trade longer time frames. That will allow me to place trades and enjoy life.

Maybe i'll even end up trading using price action only sometime in the future. But technicals are not useless
  • #279
  • Jan 9, 2009 10:55am Jan 9, 2009 10:55am
Quoting thelws
Yea, I've always wanted to do that. In the end I can't imagine myself working everyday to my millions.

Which is why I'm learning to trade longer time frames. That will allow me to place trades and enjoy life.

Maybe i'll even end up trading using price action only sometime in the future. But technicals are not useless
I just want to ask something, is it really good to plan with long time frames now? I mean because the situation of the market now is still too volatile so I think is more difficult for now, maybe I´m wrong but I really think this is the perfect moment to specialize on short time frames.
  • #280
  • Jan 9, 2009 11:46am Jan 9, 2009 11:46am
Quoting belekas
Dont shortcut your answer buddy Divergence tell alot if you know how to read it. Ok let me ask like this - isnt a chart an indicator for itself? If it aint why everyone is using it?

So you say you can trade without one right? So throw your chart at the rubish bin and just use ask/bid price to trade. Can you do that?

That's smart!!!
Good one!!

It's true what you're saying but it's also true that you can get a very complicated picture of the market if you rely too much on indicators.
I use some indicators but I prefer a simple strategy with a PA view.
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