A question to all you indicator traders

For the traders that have years of experience, are profitable, and still use indicators, I'd like to know why you still use them.

Clearly there must be more to trading than taking an MA or MACD crossover and making millions. At this point, you must know at least something about trading

support and resistance, and market structure?. This leads to to wonder why you still want indicators on your charts.


Whenever I watch something online about trading, even traders on wallstreet and other trading firms always seem to have indicators on their charts.

Why is that?

I know many traders here, that trade purely price action, and there are several long lasting threads dedicated to the subject. I myself have been learning to trade without indicators for a while now, and learning to read market structure. But I won't lie, there is something about them that draws my attention, even though I feel they make trading more complex. But maybe it's just my nature, but I always find myself going back to price, reading the swing of the market and trying to find the TL's, channels, s/r zones etc..

Just about 99.99% of threads in the "trading systems" page display charts like these:

Trading as simple as ABCD


THV system


When I see these charts, no offense to the OP's, but the first thing I think is "OMG, people understand all this?!". Yet both such threads are massively popular, boasting 5,000 replies and 25,000 replies respectively.


I feel trading should be made as simple as possible, and so it's my conclusion that indicator traders must belong to one of two groups. 1) Those that are highly intelligent and understand all the added information, or 2) Those that simply don't know any better.

But in a nutshell, I just want to know why successful traders continue to use indicators, and have not switched over to "naked" charts.

i practiced enough , so i could give an answer based on my experience.
by looking at price, i just see what price doing. but we must not forget that the market
is price and traders.
so to know what price (will) do , i also have to see what traders are doing.
only indicators can show me that.

I do not use any indicator at all.
My charts are completely empty besides some lines i draw myself.

In my experience, a lot of people of FF are just looking for a system they can use without doing all the work.
Thats why these threads are so popular i guess.
I am sure there are a lot of great systems which uses some indicators, but i am afraid they are not on this forum.
The traders with such a system would not share it on FF but trying to sell it or keep it for them self.

As far as i have seen trade rapports from banks and institutional traders (trough the Reuters Ikon platform), yes they do have indicators on their charts.
The ones i saw where mostly moving averages and RSI.
I think they have these indicators just to see what's going on in the market. They also know there are a lot of retailers who look at moving averages and other indicators.
I do not believe they will enter trades bases on indicators, they enter markets bases on fundamentals (long term) and support/resistance.

Here is an example of a rapport, this one is from 24 February made by Credit Suisse.

Dkam, you're probably right, however trading simple price action is easier than some complex system in my opinion.

Indicators are a retail phenomenon, even the bank forecasts are one of the many marketing tools targeting retail investors.

Bank traders don't use indicators, they don't even use charts, all they use is the dom.

Why is that, because what happened in the past (charts) is useless, they just focus on what is happening in the moment (that's why orders flow is the only thing they use in their trading).

Now, this doesn't mean that charts are totally useless, true they don't show where the actual orders sit in the market, nor the size of them, they just show how these orders affected the price in the past, surely not a really powerful information, but it's still better than nothing.

If you really think sincerely about it, charts are just crap, all you need to keep an eye on, is what is happening now, is the market being bought, is it being sold, is there liquidity, etc.

Everything else is crap, then if in this crap you put some indicators (crap, on crap), it all become just funny!

Indicators are the number one cause of unsuccess in trading.

I M O

almost all indicators are human made, these indicators look at the past and in fact none of them work
only fibonacci ratios are not human made , they exists in the nature by themself
and because of this it is the only correct indicator, but it has a very special way of drawing and analyzing
if one draw it in the wrong way it will give wrong predictions
elliot waves are not human made also
human discovered these waves but he did not made it
so elliot wave is another correct way of predicting price movements.

Spaceduck - you're 100% correct. Banks don't use indicators. But they know retail traders do, so it's easy for banks to target their stops.

Tablet8 - fibonacci numbers were invented to model growth rates of animal populations ( Leonardo De Fibonacci was looking specifically at the growth rate of rabbits). Are they useful in trading? No, they are quite useless. To say fibos have to be drawn "correctly" only shows they are completely subjective. They're literally in the eye of the beholder.

Elliot waves - utter complete rubbish. R. N. Elliot was a burned-out stockbroker who died penniless in a New Jersey insane asylum. He also thought his "waves" could be used to chart the course of history. But , then again, he was a nutcase in desperate need of more lithium pills. Oh, BTW, Elliot waves ARE human-made (every trader I know who uses them is a human ) . Like fibonacci lines they are completely subjective ,i.e., you have to find the "correct" wave. As with all pseudo-scientific hogwash, a theory designed to explain everything ends up explaining nothing.

Support and resistance lines - another way to hunt for stops.

Learn where traders are placing their stops (around recent swing highs and lows, S/R levels, popular MA levels) then target those stops. Your trading results will then improve. Forget indicators - they are for lazy dreamers who think they've found the Holy Grail.

I don't mean to be harsh. I just find so much nonsense on this forum that it's exasperating. Indicators don't work. the people who peddle them KNOW they don't work but sell them to suckers anyway because it's easier to make money selling false hopes than it is to actually trade. If their "systems" worked so well, why would they sell them? It reminds me of the California Gold Rush of 1849 - most miners made nothing. BUT the shopkeepers who sold them pick-axes made money as did the saloon owners who sold the miners whiskey and whores.

Trading is hard. It takes dedication and work. Don't be a sucker looking for easy ways to get rich. Oh, Tablet8, one more thing - price movements cannot be predicted in the short term . So stop attempting to predict price - you can't, I can't , nobody can. The best anyone can do is to guess where other traders are placing their stops and hunt them. But , with proper money management, it will produce profits in the long-run.

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hey big pipin.... have mentioned many times, i'm probably ff's poster child for both indicators and ea's....

why...... there is concrete well defined math behind most indicators.... they can be accurately re-created by anyone ... my macd looks exactly like enivid's, mladen's, bangdun's, sangmane's or anyone else's...... math crosses languages.....

who can define for me 'naked charts' or 'price action' .... everyone's definition will vary......

killing time bouncing back and forth between naked charts and multiple timeframes manually lookin for that next signal would burn my mind before the first trade.....
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in my trading, indicators work.... ea's work..... they simplify.... they take the weakest link, me, out of the picture..... they do the draining boring part of trading leaving me to pursue more interesting aspects.... a win win....

.... but it does look my latest test renko ea shorted the eurgbp at support.... that's life.....

will freely admit being overly dependent on them and always searching for the next..... but it is truly what i enjoy ..... and they pay the bills to boot....h
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Your question seems to assume that there are some (who are successful and still using indicators).

I'm not categorically stating that you're mistaken, of course, but it's also not an assumption I share.

I certainly know many who became successful only after eventually abandoning and renouncing their indicators, though.

HOW indicators are used, is the key.

why do you think trading naked is the best way? just because you look at a chart full of indicators and you get confused doesn't mean everyone else does. the fact that it's very difficult to automate a system that will make you money in your sleep goes to show that maybe there isn't one best way of trading and people should trade what they are comfortable with? if you feel really good using a certain set of rules and indicators, why is it better to quest for having a bare chart? they have probably loaded up a bare chart, tried it out a few times, and said "no thanks that's not for me I like my system i'm comfortable with!" it's your mistake if you think indicator users are helpless cripples who have less understanding of the market than you do.

Agreed

That sums it up, exactly.

Kinda funny to add, I was just looking through some of those "trading threads" tonight when I couldnt sleep and thinking to myself 50,000+ plus replies ? Thats crazy!!If it works everyone should be a millionaire hahaha. But thats not the case. I have to admit when I started trading I used a number of different indicators as Im sure most did as well. But trading is not some easy task of course and once people realize you gotta grind it out. Lose some money, get angry, get sad etc etc until you can commit yourself to understand the market moves in a very controlled fashion IMO, you wont make money consistently.

But the only thing I use is OBV (on balance volume) because studies have shown it works 60% of the time every time, jk but it still shows a high correlation to price movement.

I know many dont agree with this but I make money, so, I think I can say it.

The market moves in a very precise manner IMO especially during high volume market hours. 8est to NOON est (news dependent)

I think people should understand the reason why indicators are soo "hated" from profitable trades, it is not because they are "confusing" or whatsoever, it is because they simply do not work (apart maybe the OBV that somehow can have some sense, but i've never used it so don't know).

Why prop traders in trading firms and banks only use the dom (not even charts!), and not indicators, it is not because they get confused, it is because past-market-action and indicators don't offer any edge whatsoever, there have been made countless studies on this subject, this is an industry with almost unlimited amount of money and research, so they really put some effort to really know if there is some edge or not, and never ever has been found a proof that past-market movements (and indicators), fibonacci, elliot waves, patterns (H&s for example) etc., none of them (or strategies that can be built on them) have ever be found to be able to give any sort of edge whatsoever.

The human brain is known to give strong importance and footprint to "successful setups" and fastly forget about "unsuccessful ones", so an average human being would see all these things and only see the successful setups that comes from them, not seeing the unsuccessful ones.
This lead to the believing that some sort of edge is there, but scientifically such an edge has never been proven, in fact the results from these countless studies say exact the opposite, no edge.

In light of this, if a trader ever reach the profitability point, it is very probable that he would have figured this out already, and therefore he will not care about indicators and charts.

The question of this thread, why some profitable traders still use indicators, i think the answer is "No, no profitable traders use indicators, at least they don't base their trading decision to them".

It's always the same truth going around from years and years, soo scary that quite a few people have the courage to accept it, most of us keep dreaming about a profitable indicator or system that would make money for us, and most of us stay trapped in this dream that as comfortable it may be, it just prevents us to be profitables.

To sum up, previous market movements cannot predict future ones, as fx traders haven't access to dom (depth of market) and can't know where orders are in the market and how big such orders are, they have basically no real information that can give any sort of edge.
Yet the trading concept is still pretty easy, sell when market is going down, and buy when market is going up, knowing that it can reverse at any time for any reason.

What can give a sort of edge here is then risk control, as we cannot control or predict when and where market will reverse, but we can control how we react to such thing, so if the market is going down, we would sell, and accumulate profits as long as market go down, sometime it go waaaay down, sometime it just run out of momentum soon after our entry and we are forced to take a loss.

Let the profits run, cut the losses fast, hope for a good trend to be there, that's all we can do.

The opposite is true in ranging conditions, we would sell high and buy low, hoping a trend don't develop, and if it do happen, we would cut the losses fast (and perhaps open a trade in the new-trend direction).

It's as simple as that.

pitchfork,ma's and bollinger will do for me on M1 chart!

spaceduck is right. I'd say that institutionnal traders use Market Profile and Auction Market Theory based concepts too in order to see what's the current perception of the prive by the market.

yes,you're correct..
#1. price action(order flow)
#2. price projection
#3. entry/exit
#4. risk management

That's it!

What spaceduck is saying is 100% correct
I mean , people always tend to simple systems and colored indicators , blue buy and red sell . And it doesnt work !
In fact , those who follow indicators always enter after the rally or after the action . So thats why they are always too late , and remember , once you buy something , someone must buy after you so the price go to the way you which . But who in this world is stupid enough to buy after the rally was gone . Those that youre hopping for them to buy after you , had already bought in the rally , and the result is youre always too late !
Another thing is very important , this is a market that reflect the emotions of speculators , and there is no indicator based on a mathematical formula that will explain their feelings (Greed and fear) !
So what's the solution ?! Trading must be treated like any business in the world . Understan the game first and play it better than anyone .

All anyone needs is a system that keeps the way they interpret the markets stable and reasonable stops. Like most people here already know, if you can have confidence in when you are right and when you are not you can keep your losses smaller than your winners. I personally use S/R and price action. The only "indicator" I have on my charts is average daily range and I certainly don't use that to tell me where or when to enter the market.

However, I don't find it hard to believe that some of these backward looking indicators could give someone the confidence to consistently enter trades and, coupled with good risk management, consistently walk away with some profit. Any system that produces a positive equity curve will make you a gazillion dollars eventually. Obviously I use what I think is better. I don't know that we will ever be able to prove that any system is the best but it is certainly easiest to point to the types of systems that 98% of new traders use to blow out their accounts.

As far as institutional traders go, many of them play for long-term moves and lean heavily on fundamentals. I don't think anyone would say that an RSI, Stochastic, Ichi-moku cloud, S/R line, Fib or moving average on the GBP/USD chart 12 months ago would have told you that the UK would transition from an accelerating economy and likely being the first to raise rates leaving us where we are now. And I seriously doubt that when Soros took on the UK gov with his famous Cable trade that it was due to price breaking through his parabolic SAR indcator. On the flip-side I'm sure people here would back me up when I say that getting the fundamental direction right doesn't make for a profitable day, or even swing, trader. My point is just that the comparison of successful retail trader's charts and institutional charts (the ones they use for trading, not for marketing) is apples and oranges.

Some will; some won't.

Getting the fundamental direction right undeniably makes for a better probability of being a successful daytrader or swing trader than getting it wrong.

I'm not so sure about that.

My father's an institutional trader and I'm a retail trader and we trade from more or less the same charts. I suspect there's a far more widespread assumption among retail traders that institutional traders are using indicators than is justified by the reality.