lagging indicators

I am currently using xtick for charting .
With xtick they have a function called painting where you can set up alerts on different indicators.
I did a simple test on rsi and stockastics (overbought and oversold alerts) and found that when price reached the oversold/overbought levels the results were as random as a coin toss.
In fact it was plain dangerous to put any faith in these signals at all because the price was just as apt to continue in the initial direction as to reverse.
REALLY IT WAS 50/50
This showed me that these indicators are less than usefull, because as I mentioned they could be downright dangerous
I have no idea why people would place any faith at all in overbought and oversold indicators after that experience.

Anyone can see this in a minute with XTICK or MT4 so what am I missing here....
Could anyone explain to me why people use these indicators ????

By themselves, just about every indicator has the same problem, however you will find very few that uses these indicators by themselves. Indicators really should be used for confirmation at best, and as most pro's will tell you in the end, you can't beat price action as your guide to what will happen next.

I agree wih you 100% but today i found this thread on another forum. It`s interesting the few indicators you`ll find there. They play with price in a different way. The thread does not support them is just a search in that topic.
a group of them call my attention -polynomial regression indicators-
I´m far away to be a person with knowledge in statistics but i know polynomial regression is a tool that tries to forecast the near future so i will play with this indicators for cuople of weeks. Nothing to lose.
You can find the info here.

forecasting indicators - Forex Trading

No, total waste of time as far as I can see, but there are good and reliable ways to predict movements.

Because they are too stupid to figure out that market price movement isn't the result of a probability distribution.

My theory is that by the time people realize that indicators are useless, they are out of money. So they quit and join the group of 90% that never made any money trading. And that's where you come in.


And then the cycle repeats itself. There is a sucker born every minute. So sad...
...on the other hand, that's where the money comes for the top 10% that trade using other methods. John Carter describes this pretty well in "Mastering the Trade".

Dane

I think it’s unfair to be slagging off overbought/oversold indicators just because they don’t work for you. I know there are many traders that use these indicators with great effect. Of course using them on there own, like any indicator, is a big no no. Maybe you haven’t found the right indicator that works for you. Maybe they are not for you, which is fair enough. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o></o>

Personally I use Stochastic’s in COMBINATION with a number of other indicators when I trade.

I realize that most people use indicators but watching succesful people in this forum I have become more price action oriented. If you are able to profitable using just classic indicators, that's great. But, in my view most people get to attached to them and in the process they loose the big picture. Combining traditional indicators with price action, that's another story.

Dane

It is my general advice to look at a chart from larger timescales (at least the two larger than what you're trading) and consider your opinion, and then use indicators to warn against trades.

Markets can and frequently do reach and stay in oversold levels for long periods. Just as there are true bull and bear markets, rather than just trending and retracement.

If you want to know whether to trust an overbought level, look at the same indicator (oscillator) on a larger time frame and if you see a downwards sloping line which is below zero or about to cross to below, that is a more reliable time to sell than using the indicator on one timescale only.

Some traders recommend using only one indicator of any type. But use them together, and most of all, use the chart, with indicator as confirmation.