Indicators... The Beautiful Lie

Smittens4212. The problem is knowing when the market is trend or range. This is also subjective.

I completely agree, but everything in trading charts is subjective. If it weren't, trading would be much simpler. The point is that if you know what to look for, using various indicators can help one visualise and make sense of what the market is doing, which in turn can be used to find signals (if that's your thing). If you believe the market is ranging, stochastics can indicate points of exhaustion and used along with price action (or even independant of it) and S/R levels to finetune good range plays. Of course that completely depends on whether your belief that the market is ranging is true enough for your trade setup, but this is still true even without using an indicator.

Its funny how people with less than a year of trades under their belt all of a sudden become gurus on what works and what doesn't in trading.

It really pisses me off these days when people start saying indicators don't work, and they are lagging and a derivative of price and whatnot and it shouldn't be looked at.

Like someone else earlier had said, its become cool and hip to jump on the indicator hating bandwagon.

But no one addresses the true reason why people fail - which is they don't know what to look for. They can't differentiate between a high probability trade from a low probability trade, they don't have proper money management, they don't have the proper psychology.. By the way everything is subjective, trading is subjective because there's so many ways people can look to take a given movement in price, some ride momentum, some ride the reversals, others breakouts, I mean the list can go on, hence there is no right or wrong. The only right or wrong is whether your methodology used in a given context of a trade works or it doesnt?

Someone here posted about knowing whether market is ranging or trending, and about using indicators for that. I mean that gives you no context. You have to look at a market and know what tf or what price you want to trade on, and how much you're looking to trade. Whats ranging on a 4 hr market, when you go to shorter timeframes, looks like beautiful waves. Heck open up a 5sec chart and you will see nice trends all day long to ride. You have to know what type of trader you are, what are you looking to trade and what kind of movement you are looking for..

When I used to first trade, heck I took every MACD crossover on the 1 minute I could take, obviously that didn't work out too well but that doesn't mean MACD is crap and is lagging or whatever, I mean no indicators or anything for that matter can tell you what price will do 1 sec from now, we are just working with probabilities and price history afterall. We are in the business of looking for patterns, whether it be in price, indicator levels, or history.. So I don't know why people get so upset when they look at a stoch indi at oversold levels thinking price will come down and yet price continues to go on a 200 pip run and then go on to hate stochs..

I mean guys look at things in context. Indicators, price action, fibs, everything is used to tell a story. Some guys go on here and saying oh FIBS are a self fulfilling prophecy.. FINE, WHO CARES, I mean I've seen fibs on 1 sec charts and it still is relevant, that doesn't mean someone blindly takes a trade at the 50 or 61.8 level.. I mean I'm looking for a story here, if price repeatedly rejected at 61.8 level, heck to me that says theres resistance there for whatever reason, I'm gona play a bounce to that, thats the way I trade. Some people will only trade the break of it, sure, thats fine too, so theres no wrong way, its just whether your style given the context of the trade works or it doesn't, and you just keep fine tuning something that looks promising until it fits just right for you.. It takes time and it takes years, it ain't easy.

So don't jump into these fads of Macd hating price action is king and all that crap, I mean they are all tools. Some tools are good for certain jobs AT A CERTAIN TIME... Just cuz you don't know how to use a chainsaw that dont mean the chainsaw is crap..

So be intelligent, treat things seriously, understand what something does and what is it telling you, and what does that mean in relation to the current price environment.. Also ask yourself, what are you looking for? What do you like to see price do? What are you comfortable with? You will be amazed at how many people cant answer that.. All they care about is making pips, and jump from system to system and indicator to indicator and when all those tell them a story they are not ready to hear and they start losing pips they go on a system hatin indicator hatin rampage.. So know yourself as a trader, know what you are asking of the market, and this may sound simple, but it really isn't. It takes trading in a lot of different market sentiments and situations to understand what one is comfortable with.. Once you know what you are asking of the market to show you, you will learn what indicator can give you that information, if any at all, and thats how actually people get to create new indis. To give them the specific info THEY need as their answers from the market. They should never be used to forecast, just think of it as another news feed explaining whats going on from that perspective, then you as a trader compiles all the data and make a decision whether its an environment suitable for a trade or not..

Hope I've given some perspective, sorry for the long rant.. it just gets frustratin sometimes

Ron

Is it "fashionable" to hate indicators? This thread seems to suggest otherwise.
PS I never said I hate them.

Okay, maybe I owe you a bit of an apology for being sarcastic on my last post. I did try to give some useful insight, for what it's worth, on the one previous to that. It's just that to see blanket statements, like the one's above, being made...

Many good posts have been made here so, thanks for the thread.

Anyway good luck and see you later.

Fxsurfer. No worries, buddy. Just want some good discussion.

Maybe "HATE" is a strong word, but the terms "useless" and "lagging", insenuating "ineffictive" is quite pervasive.. Hence the movement for people to "go naked" as if they have reached some enlightened state..

Not singling out you either..

Well Crap! I guess I will just go ahead and quit now because I trade exclusively by indicators.

So what if they are slow. I am not interested in picking bottoms. Most of the time when you pick bottoms all you get is smelly fingers.

There are people who trade chart patterns and do really well with it. Me, I can't see the bunny rabbit in the clouds when everyone else can so chart patterns just don't work for me.

I mean seriously, does it really matter how someone trades as long as they are putting money in the Hip National Bank??

Everyone should just pick whatever method suites their personality. If you like looking for patterns or using support and resistance or just a simple moving average cross as long as it works for you, trade it. The proof is in the profit.

well i remember Spudfyre saying he started out with 2k and turned that into seven figures over time by simply trading with stochastics.

There are ppl who have made it with indicators and others who have made it without indicators.


I really don't think they're useless

well, i would say without indicators i'm lost. to me indicators are like guide in the sea of price. they are not 100% accurate. you need to know them well and don't blindly follow them. got to listen carefully.

Ok guys, I must be honest. I would like to retract my comment about indicators being completely useless and replace it with "are of minimal use and at best, just guidelines."

Lets take what craig said about ATR. This indicator measures volatility, which is an indirect measure of liquidity. It lets us know what is reasonable to expect from a currency pair, in terms of it's behavior. This allows one to manage his risk better. Great, it doesn't pinpoint any specific value, nor does it give you any certainty, it's just a general range.

MACD--> The difference between two moving averages, and a logical way to measure momentum. Again, all it can tell you is that the markets momentum is changing. If it's slowing down it could be getting ready for a reversal or a consolidation, or a renewed burst in its original direction.

Now... All these things you can see with the same accuracy using only your eyes!!!!!

The problem is people try to use indicators to generate precise signals in an environment that is anything but precise. This is the same reason why economic models will never be 100% accurate.... it's not science.

Where I believe indicators have some use is in giving you a numerical signal, which can be used to keep YOU consistent. They allow us to better monitor ourselves and are therefore useful for self evaluation. (provided you always use them in the same way). They can be rough guides I suppose, but I doubt much better that you own eyes.

I think it is foolishness to bash and completely disregard indicators as nonsense.

Indicators can be useful if you become a master of the particular indicator you are using.

I think a lot of people belittle indicators because they aren't using them correctly, or have read in forums that the new craze it to put indicators down.

Sweeping statements and generalisations like, 'Indicators are Rubbish', annoy me, as it stinks of ignorance.

Juan, this topic has been discussed many times before, e.g. here. It's inevitable that you'll get comment from those who trade profitably using indicators (or know others that do). And, on the other hand, arguments from those who haven't found a way to achieve it, and hence believe that because they can't make indicators work for them, then their ego tells them that it must be impossible.

Likewise, here with Fibos. In fact, you could say the same with every TA tool, because there is no Holy Grail. But people are looking for color-by-number, plug-and-play solutions that work every time, and dismiss anything that doesn't immediately meet their expectations.

As has already been pointed out, it's not the tools that are used, but the way in which all of the pieces are put together, that provides the winning edge. There are occasions when indicators will fail. There are also occasions when naked trading will result in sequences of losses. That is not the fault of the approach, that is simply due to the chaotic way in which markets move. Success depends not on the tool set, then, but on how well the trader handles this uncertainty, both methodologically and emotionally.

Like Magnum says, ultimately nobody can argue with bottom line. In this case it's not the way you play the game that matters, but whether (and how much) you win or lose.

And like Jack Schwager says in the preface of his book, New Market Wizards): "There are a million different ways to make money in markets. The irony is that they are all very difficult to find."

Guys, all I'm saying is people put to much weight on indicators. I would also like to say I'm not bashing indicators because they failed me, I make money without them. Also, I see people feel it's fashionable to bash indicators... why then has not one single person taken my stance. I think "you may have the bull by the udder".

ATR measures Average Range over a number of bars, just as the name says. In no way does it measure liquidity, actually, often the larger the ATR the less liquidity is likely over those prices.

Leonlorenzo, actually if there are less participants in a market then obviously moves will be more pronounced (ie higher volatility ) because there are less people able to accept the different ranges in price. Conversely, if the are more participants the "granularity" if you like is higher and therefore price is more stable and less volatile.
Go read up.

Also your comment is a contradiction.
"In no way does it measure liquidity, In actual fact the larger the ATR the less liquidity was likely over those prices."
Make up your mind.

???

Lol

Read what I said again.

Ok, real slow........
you say high ART = less liquidity.....
this is an indirect relationship.....
Did you do maths??

Why do you think spreads are so tight for EURO/USD--> most liquid
Why is the Rand/USD so volatile --> low liquidity

A CLEAR RELATIONSHIP ...