Do the indicators trick us into making the wrong decision? | Forex Factory

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Do the indicators trick us into making the wrong decision?

  • #1
  • First Post: Feb 11, 2012 8:52pm Feb 11, 2012 8:52pm
Okay here is a thought to ponder.......

 

  1. Most people trade using indicators.
  2. Most people lose money trading Forex.


So are the indicators sucking us all in like sheep?

I have just returned to Forex trading after a break and I have been thinking more and more about this concept.

Many times I have been stopped out when the price hit my stop and within a few pips the price has reversed and gone rocketing in the opposite direction (without me)

I know I am not the only one that this happens to, so i can only assume that the indicators cause masses of people to do the same thing at the same time so a select few who know the secrets of this FOREX thingy can do the opposite action and make huge profits.

Has this ever happened to you?

  • #2
  • Feb 12, 2012 3:48am Feb 12, 2012 3:48am
Indicators lag, as they are a function of the price, so naturally your timing is going to lag the price action.

You have to use indicators to give information rather than give signals.
It never gets easier, you just get better
  • #3
  • Feb 12, 2012 8:30am Feb 12, 2012 8:30am
Quoting Lyndon001
Many times I have been stopped out when the price hit my stop and within a few pips the price has reversed and gone rocketing in the opposite direction (without me)

I know I am not the only one that this happens to, so i can only assume that the indicators cause masses of people to do the same thing at the same time so a select few who know the secrets of this FOREX thingy can do the opposite action and make huge profits.

Has this ever happened to you?
Indicators don't have much (if any) predictive power, so it's natural that you are losing. You simply have no edge.

As for the price hitting your stop to the pip and then reversing many times...be careful, I am very familiar with gambling behavior and this is exactly how gamblers think, it's always a big conspiracy where everything revolves around them, it's always somone else's fault. They never realize there is a mathematical reason why they are losing.

Also, (about your stops being hitted) how many times is "many times"? Can You quantify that? Price hitting your stop and then reversing is just one of many possible outcomes, it can happen, it will happen.

Good luck!
  • #4
  • Feb 12, 2012 9:02am Feb 12, 2012 9:02am
Quoting Lyndon001
So are the indicators sucking us all in like sheep?
I guess there's certainly an element of that, and indicators are just part of the package.

You have to use it to your advantage.
  • #5
  • Feb 12, 2012 9:36am Feb 12, 2012 9:36am
Quoting Lyndon001
Many times I have been stopped out when the price hit my stop and within a few pips the price has reversed and gone rocketing in the opposite direction (without me)
Are you deciding the position of your stop based on an indicator? Chances are you are placing it in an obvious place where it will get hunted. eg previous support or resistance.

Personally I don't see what is wrong with using indicators provided you realise they lag and only use them as a guide to what the market is doing. Basing a decision of one squiggly line crossing another is a sure way to get eaten alive.
  • #6
  • Feb 12, 2012 9:42am Feb 12, 2012 9:42am
In my opinion, if you use indicators as signals to enter or exit the trade, you will lose. Don't really think that there is a combination of them that works in the long run. I use indicators only to provide me with information about the trend, maybe some large moving averages can act as support/resistance levels, but that is it. In my opinion, they are useless as signals to enter a trade. At least in forex market.
  • #7
  • Feb 12, 2012 10:57am Feb 12, 2012 10:57am
Quoting calamardo
Indicators don't have much (if any) predictive power, so it's natural that you are losing. You simply have no edge.

As for the price hitting your stop to the pip and then reversing many times...be careful, I am very familiar with gambling behavior and this is exactly how gamblers think, it's always a big conspiracy where everything revolves around them, it's always somone else's fault. They never realize there is a mathematical reason why they are losing.

Also, (about your stops being hitted) how many times is "many times"? Can You quantify...
I'm not so sure about them not having predictive power (as such) I am thinking (and I may be completely out to lunch here) that they guide the decision of the majority. So anyone who reads the traders and not the market will be trying to predict what the people will be doing and not what the market will be doing. So when a major indicator shows a reversal, a breakout or what ever..... you plan your strategy to profit from that trader sentiment.

Im interested in what you say about the gambling behavior although I don't know too much about it.

I have taken a break from FOREX for a couple of years and have only recently started trading again. When I did this before I never managed to make a profit. I only trade a micro account so it is more for the interest than the money.

I follow a signals service which I am quite impressed with but I still want to learn how to trade myself, I am trying to figure out how and why they make the decisions they do, because at that particular time I would not have made that decision.... but there again I would have made my usual same wrong decision.

Hi Willf... I think that we are thinking along the same lines when you mention putting stops in obvious places and that is something I never thought of because with my old thinking is that the obvious place for a stop IS the obvious place to put a stop..... so anyone reading me and the other thousands of traders who put their stops there are easy targets for anyone who is reading the people not the market.
  • #8
  • Feb 12, 2012 11:07am Feb 12, 2012 11:07am
Indicators just provide the info, you make the decision so nope, they do not trick you into making a wrong decision. But using too many indicators will, since you will spend most of the time trying to work out what's being indicated rather than concentrate on the markets..
  • #9
  • Feb 12, 2012 11:57am Feb 12, 2012 11:57am
Quoting Lyndon001
Okay here is a thought to ponder.......

 

  1. Most people trade using indicators.
  2. Most people lose money trading Forex.


So are the indicators sucking us all in like sheep?

I have just returned to Forex trading after a break and I have been thinking more and more about this concept.

Many times I have been stopped out when the price hit my stop and within a few pips the price has reversed and gone rocketing in the opposite direction (without me)

I know I am not the only one that this happens to, so i can only assume that the indicators...

I don't think there is a correlation between using indicators and being a loser.
I think most people using price action, fundamentals, S/R levels, volume... will also lose.

You get stopped out frequently cause you don't know what you are doing, that's the only reason why you lose and why everybody else is losing. You need to do the work that other people won't do - research, then anything will work.
  • #10
  • Feb 12, 2012 12:14pm Feb 12, 2012 12:14pm
In my experience using indicators has helped me read pure price action easier with a naked eye. I find its not what type of indicator you use its HOW you use it and when and why. Most people use it for entry and exit signals which is wrong and will get you some wins but over the longer term your losses will outweight your wins so using 1 or 2 is okay but understanding market flow and structure is key.
Find your Favourite Pattern
  • #11
  • Feb 12, 2012 12:22pm Feb 12, 2012 12:22pm
Quoting Custos
I don't think there is a correlation between using indicators and being a loser.
I think most people using price action, fundamentals, S/R levels, volume... will also lose.

You get stopped out frequently cause you don't know what you are doing, that's the only reason why you lose and why everybody else is losing. You need to do the work that other people won't do - research, then anything will work.
Would you like to expand on your last paragraph, I'm interested in what you are saying but it is very vague.

An example of one of those "anythings" would be nice.
  • #12
  • Feb 12, 2012 12:44pm Feb 12, 2012 12:44pm
Quoting Lyndon001
Would you like to expand on your last paragraph, I'm interested in what you are saying but it is very vague.

An example of one of those "anythings" would be nice.
I am on purpose vague, cause I am not sharing the results of my research.
  • #13
  • Feb 12, 2012 12:50pm Feb 12, 2012 12:50pm
Quoting Lyndon001
Would you like to expand on your last paragraph, I'm interested in what you are saying but it is very vague.

An example of one of those "anythings" would be nice.
Quoting Custos
I am on purpose vague, cause I am not sharing the results of my research.
Finding a winning method is something you will have to figure out. Even if you were shown a system the chances are you will get different results because everyone interprets trading differently.
  • #14
  • Feb 12, 2012 1:00pm Feb 12, 2012 1:00pm
That's okay Custos, I fully understand what you are saying.

But I do wonder why such a knowledgeable trader would be in the rookie discussion.

Jus' Sayin'
  • #15
  • Feb 12, 2012 1:02pm Feb 12, 2012 1:02pm
Quoting Lyndon001
That's okay Custos, I fully understand what you are saying.

But I do wonder why such a knowledgeable trader would be in the rookie discussion.

Jus' Sayin'
Cause I am bored
  • #16
  • Feb 12, 2012 1:09pm Feb 12, 2012 1:09pm
Ha ha nice come back.......
  • #17
  • Feb 12, 2012 1:10pm Feb 12, 2012 1:10pm
Quoting Lyndon001
Would you like to expand on your last paragraph, I'm interested in what you are saying but it is very vague.

An example of one of those "anythings" would be nice.

Try to research profitable price patterns instead of using tech. indicators, i make my trades slowly based on naked charts & got my results significantly improved after dumping tech. indicators, however i need to say that i do find market / volume profile to be of great value. Also studying time based range statisticus will provide you with an edge & make it easier to define stop / profit taking targets.
  • #18
  • Feb 12, 2012 1:17pm Feb 12, 2012 1:17pm
Quoting Lyndon001
Ha ha nice come back.......
well, basically I approach the markets from a very scientific way. I don't give a crap about psychology, discretion or whatever.

Normally I program my trading ideas and get myself a log of +10.000 trades. Then I analyse that bunch. If the system produced consistently profits over the long-term, I then test it on +100.000 trades. If it still produces profits over the long-term, I look how I can use it in my portfolio.
  • #19
  • Feb 12, 2012 1:50pm Feb 12, 2012 1:50pm
well we certainly do not rely on just one indicator right? we use a combination to prevent false signals. however, indicators are not totally accurate and they can still produce false signals.
  • #20
  • Feb 12, 2012 2:11pm Feb 12, 2012 2:11pm
I thought each indicator serves one variable towards a formulaic approach
-- It helps if they each look funky different -- ,
while price action + chart drawing is holistic (anything goes).
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