Do we need indicators?

TRO has just posted with a video. I think that it is worth reading by all those new to trading and many, not so new, especially when there will be more time to think about these things, over the holiday.

Do we need indicators to assist our entries and exits? He makes a good argument against.

There is, also, the point against spending good money on a "Fantastic New Indicator" that will earn its cost in just a few trades!



http://www.youtube.com/watch?v=BhdZf5iCHLI&feature=youtu.be

Agreed S

TRO is someone I have followed since the early 2000's .........hes outspoken and controversial at times (in many subjects) .........but still everything he talks about is always worth a listen


N

Awesome video!

Any suggestions on how this applies to scalping a 1 min bar for about 2-3 minutes?

No suggestion is out of the box. Any advice is appreciated!!

Do we need indicators? - For me yes - besides a clock I need extra assistance from certain indicators on a chart to get the accuracy I require for 5 pip stops. I tried naked charts after 8 yrs of my own bespoke indicators - and yes I could trade and even make money - but only with a lot larger stop size.

As traders we are all different - what might work for some - will be totally a waste of time for others - depending on are own requirements and of course our strengths and weaknesses etc.

With regards to scalping a 1 min bar for 2 or 3 mins - catch it at the right time of the session and you might make 15 -30 pips ( depending on the FX pair) - whilst 80 -90% of the time even with the correct direction call - you are just going to make 2- 7 pips net. OK if you have entered with a 2-5 pip stop - but not worth it if you are on 10+ pip stops - as RR's would be poor - therefore requiring 75- 85% win ratio accuracy on going

TRO's methods are OK if you are just after average profitable results - ie 40 -70% per annum on retail size accounts under $100k. If you are after 100 -500% results per annum on retail size capital accounts ( not compounding - as not sustainable) you need a far more complex method with one or two"edges" that can combine high win ratios ( over 70% +) with small stops allowing you to obtain RR's of 2+ and even up to 5 or more on a regular daily basis,

This cannot be done ongoing over months and years with simple trading methods - as the market and the market makers are just too clever to allow that to happen.

Regards

F

Forexmospherian said:

Do we need indicators? - For me yes - besides a clock I need extra assistance from certain indicators on a chart to get the accuracy I require for 5 pip stops. I tried naked charts after 8 yrs of my own bespoke indicators - and yes I could trade and even make money - but only with a lot larger stop size.

As traders we are all different - what might work for some - will be totally a waste of time for others - depending on are own requirements and of course our strengths and weaknesses etc.

With regards to scalping a 1 min bar for 2 or 3 mins - catch it at the right time of the session and you might make 15 -30 pips ( depending on the FX pair) - whilst 80 -90% of the time even with the correct direction call - you are just going to make 2- 7 pips net. OK if you have entered with a 2-5 pip stop - but not worth it if you are on 10+ pip stops - as RR's would be poor - therefore requiring 75- 85% win ratio accuracy on going

TRO's methods are OK if you are just after average profitable results - ie 40 -70% per annum on retail size accounts under $100k. If you are after 100 -500% results per annum on retail size capital accounts ( not compounding - as not sustainable) you need a far more complex method with one or two"edges" that can combine high win ratios ( over 70% +) with small stops allowing you to obtain RR's of 2+ and even up to 5 or more on a regular daily basis,

This cannot be done ongoing over months and years with simple trading methods - as the market and the market makers are just too clever to allow that to happen.

Regards

F

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I use averages and Bollingers, it's no good trying to look clever and say that I don't. The reason that I use them is that I need a confirmation that what I am going to trade is overbought, oversold and the direction. Sometimes, I draw a channel trend, too. However, the indicators that are underneath the chart, I do not use.

It all comes down to what you need for confirmation in either entry or exit.

My own personal style, which has tried quite literally everything over the past 10 years, the answer is No. My entries, exits and management are on price action alone. Nothing more or less.

It's all about the journey getting to that "aha" moment. If you find something that works, dovetails into your style and personality, it's job done.

Slapshot said:

It all comes down to what you need for confirmation in either entry or exit.

My own personal style, which has tried quite literally everything over the past 10 years, the answer is No. My entries, exits and management are on price action alone. Nothing more or less.

It's all about the journey getting to that "aha" moment. If you find something that works, dovetails into your style and personality, it's job done.

Click to expand...

Agreed. You need to find a tarding style that suits your personality. The majority of indicators are lagging and show nothing more than you can see from price action alone. The most powerful indicator you have in your arsenal is your own perception of the market. Forget indicators they just cloud your judgement. Then only 'indicator' I would advise is S/R. IMHO that's all you need

+1 Mobius

One of the most important things I've learned over the years is to learn and live your market. The only caveat i would put is that the market is liquid. I'm talking about my style which is day trading and nothing more, thats what I do.

S/R is very important. I personally don't consider them to be indicators, just lines in the sand, areas of 'potential' interest. Markets do have a tendency to respect them but will also blow straight through them. Don't overcomplicate them. Less is more if that makes sense.

The perception or intuition comes from learning that market and your understanding of it, you get a 'feel' for whats about to happen. Again I'm referencing this to day trading from my own perspective.

My own journey started with nothing, went to everything, stripped back to nothing, picked up a few things again and ended up with nothing again. When I look back, the simple things are so obvious but when things go wrong we feel we the need to learn 'new' things or learn how 'not' to do something, which is counterintuitive knowing what I know now. There is no magic sequence, indicator, setup, etc. All there is is hard work. The ability to cut losses short and I mean very short. No hesitation, no conflicting argument. Done. Dusted. Move on. Don't focus on the money, focus on the process and the management.

For those that are interested, I've been trained and guided by two traders. One a floor trader from the CME and another a slighter longer timeframe day trader. The messages from both have been identical regardless of the timeframe. Yes, they've taught me things from different approaches, but the one message that was consistent from both is this. The human mind is the most difficult obstacle to overcome.

Finally, enjoy what you do.

Slapshot said:

+1 Mobius

One of the most important things I've learned over the years is to learn and live your market. The only caveat i would put is that the market is liquid. I'm talking about my style which is day trading and nothing more, thats what I do.

S/R is very important. I personally don't consider them to be indicators, just lines in the sand, areas of 'potential' interest. Markets do have a tendency to respect them but will also blow straight through them. Don't overcomplicate them. Less is more if that makes sense.

The perception or intuition comes from learning that market and your understanding of it, you get a 'feel' for whats about to happen. Again I'm referencing this to day trading from my own perspective.

My own journey started with nothing, went to everything, stripped back to nothing, picked up a few things again and ended up with nothing again. When I look back, the simple things are so obvious but when things go wrong we feel we the need to learn 'new' things or learn how 'not' to do something, which is counterintuitive knowing what I know now. There is no magic sequence, indicator, setup, etc. All there is is hard work. The ability to cut losses short and I mean very short. No hesitation, no conflicting argument. Done. Dusted. Move on. Don't focus on the money, focus on the process and the management.

For those that are interested, I've been trained and guided by two traders. One a floor trader from the CME and another a slighter longer timeframe day trader. The messages from both have been identical regardless of the timeframe. Yes, they've taught me things from different approaches, but the one message that was consistent from both is this. The human mind is the most difficult obstacle to overcome.

Finally, enjoy what you do.

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Nicely said Slapshot,

I agree in most although this notion of trading without emotion I believe is a fallacy. Emotions are the things that have guided us to where we are today, you need to listen to these and let them guide your trading decisions.... however you can only learn this over time. I think they say that it takes 10,000 hours to become an expert in any field and I tend to agree with that when it comes to trading, if not more. The more you look at the charts the more you become intuitive as to the general day to day movements of them. S/R are just lines in the sand, to be fair you could probably draw a few lines on a chart at the round numbers and trade of those, the key is money management... I'll say this again

THE KEY IS MONEY MANAGEMENT

Time your entries, cut your losses, let those winners run, 95% of trading is all in the head

Oh don't get me wrong, emotion is the hardest part. Letting go, admitting you're wrong, accepting you're wrong are very difficult to overcome.

This is my thought process, whether the trade one lost or b/e:

Is price doing what i expect it to do at the area I'm expecting it to? Yes. Enter the trade.

Is price continuing to do what I expected it to do? Yes. Take off some profit to cover commissions. Targets set for remaining positions.

Is price continuing to do what I expect? Yes, profit taken at my levels preset before I entered the trade. No? Close % of contracts and bring stop to b/e. Wait for next opportunity.

Losing trade:

Is price doing what i expect it to do at the area I'm expecting it to? Yes. Enter the trade.

Is price continuing to do what I expected it to do? No. Close out positions and move on.



Post trade/day analysis:

Did i enter on my pre defined criteria? Yes.
Was the trade a winner or loser? Both
Did I manage the trade effectively? Yes.
Did I take profit on the winners where I wanted to? Yes
Did I get out of the losing trade at the earliest opportunity? Yes.

There really isn't much more to it than that. The most important fact here is this: The losing trades. Did I enter when the conditions said 'enter a trade'? Yes they did. Did things unfold as I expected? No. Did I get out as soon as was reasonably possible? Yes.

In other words, I entered following my rules. It didn't work, I exited because it didn't work. My entry was sound based on the criteria I've set and learned to trust. I managed the losing trade, managing my risk. The winning trade did it's job.

I know there's a ton of cliches around this but it really is very simple. Too many focus on the how and not the why.

Slapshot said:

Oh don't get me wrong, emotion is the hardest part. Letting go, admitting you're wrong, accepting you're wrong are very difficult to overcome.

This is my thought process, whether the trade one lost or b/e:

Is price doing what i expect it to do at the area I'm expecting it to? Yes. Enter the trade.

Is price continuing to do what I expected it to do? Yes. Take off some profit to cover commissions. Targets set for remaining positions.

Is price continuing to do what I expect? Yes, profit taken at my levels preset before I entered the trade. No? Close % of contracts and bring stop to b/e. Wait for next opportunity.

Losing trade:

Is price doing what i expect it to do at the area I'm expecting it to? Yes. Enter the trade.

Is price continuing to do what I expected it to do? No. Close out positions and move on.



Post trade/day analysis:

Did i enter on my pre defined criteria? Yes.
Was the trade a winner or loser? Both
Did I manage the trade effectively? Yes.
Did I take profit on the winners where I wanted to? Yes
Did I get out of the losing trade at the earliest opportunity? Yes.

There really isn't much more to it than that. The most important fact here is this: The losing trades. Did I enter when the conditions said 'enter a trade'? Yes they did. Did things unfold as I expected? No. Did I get out as soon as was reasonably possible? Yes.

In other words, I entered following my rules. It didn't work, I exited because it didn't work. My entry was sound based on the criteria I've set and learned to trust. I managed the losing trade, managing my risk. The winning trade did it's job.

I know there's a ton of cliches around this but it really is very simple. Too many focus on the how and not the why.

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Essentially it comes down to having a trading plan that you're confident with and one that you have developed yourself over time. From reading your posts I think you have a great mindset to trading. The psychology of trading is the main factor as to why so many people don't make it in this market. It's the human nature of always wanting to be right. Analysis and objective reasoning as to why a certain trade failed is key. Did you time your entry right. Did you base that trade on the plan/strategy that you have devised.

When I first started out in this game the biggest obstacle I had to overcome was over trading. Trading for the sake of trading. I was paranoid I was going to miss out on the big move. I had to be in the market 'just in case'.

Anyone new to this game listen to this guy, you need to develop your own plan, your own strategy, you have to develop it over time to have the confidence in it that when you're on a losing streak you know that over time the winners will out number the losses. However that may be, strike ratio or R:R ratio. Having said that I'm a firm believer that R:R ratios are nothing more than a limiting process. It doesn't matter if you have 1:4 R/R if your win outnumbers your loss by 5 for instance. Again it's how you deal with those losses.

As a great woman once said;

"It's how you deal with failure that determines how you eventually achieve success" - Charlotte Whitton

+1 Mobius.

I've battled (and still do) with trading demons. I trade on impulse through the 'need' to trade more frequently than I like. What turned things around was keeping a diary. I know it's another cliched approach sold by many but it works. When you start to look at what you did, when, where and how and the reasons behind it you start to recognise over time in real time the errors. Actually taking pen to paper, no typing on a PC, actually writing pen to paper. It made me appreciate what I was writing, understanding it.

Strategies are just a method to devise an entry and then subsequent mgt & exit based on certain conditions that you have identified. It takes time, learning your market, understanding it's nuances . The market isn't rigid so being able to change one's opinion on the fly and leave that mindset behind in favour of the new opinion is vital. That is the most important part of a strategy. Seriously, the entering and exiting is the easy part. Controlling what happens in between is the most difficult task, because essentially you have no control (i.e the market will move regardless).

I wasn't trying to take this thread on indicators off track but feel I have. The point I was trying to make is that when were wrong it's human nature to look for an alternative or something that give us confidence in our decision making process.

I personally don't need indicators nor do i believe the majority add any value. I'm not belittling them and as I said before, if you find something that works and they're part of your process, brilliant!! Don't fix something that isn't broken.

Here's a trading thought (probably for another thread) that took me a long time to fully appreciate: If you're long in the market what are you? A buyer or a seller?

Slapshot said:

+1 Mobius.


Strategies are just a method to devise an entry and then subsequent mgt & exit based on certain conditions that you have identified. It takes time, learning your market, understanding it's nuances . The market isn't rigid so being able to change one's opinion on the fly and leave that mindset behind in favour of the new opinion is vital. That is the most important part of a strategy. Seriously, the entering and exiting is the easy part. Controlling what happens in between is the most difficult task, because essentially you have no control (i.e the market will move regardless).


Here's a trading thought (probably for another thread) that took me a long time to fully appreciate: If you're long in the market what are you? A buyer or a seller?

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yep entries are key but only because it gives you faith in the system you are trading, it gives you that mindset that where you have entered is the right point to enter and from there you have to manage the trade. If you enter on the cross of a MA, you enter on the break of a major support line, you enter because the stoch has moved above xxx it doesn't matter, once you're in you're in and it's how you manage that trade that determines whether in the long term you will succeed or fail.

you can't control what happens in between your entry and exit, you have no control, you only have control over where you enter and where you exit. If you don't have the personality type to be able to let go I'd suggest trading isn't for you. It takes a lot for someone to admit they're wrong, to admit that despite how much they've analysed something they've still got it wrong. You can be trading for a number of years and still not know this.

As far as hijacking goes, yep agree, sorry. Indicators... if they give you comfort then use them but be aware they are almost like a superstition, once you've been trading for a few years you'll know your instrument well enough to realise that indicators mean nothing, you start off with all the indicators you can put on a chart, stochs, bolly bands, MAs and one by one they get removed until you're left with what truly matters.

The price

Agree - entries are key and as a successful intraday short term / scalper - I know even when I get a wrong trade - i still might be able to exit with a profit - ie my stops on all trades are 3-7 pips ( average 5 pips) and by main targets are in the 7 -25 pip range . If i get an entry spot on in a time window and the trade only goes 1- 3 pips against me at the start - even if i don't make my target of say 12 pips or 18+ pips and I have made a mistake - I am normally still able to exit with a profit be it only 1 pip or 5 pips.

Combine that with leaving part stake on ( 30%) with the stop in profit ( even if it is only a few pips) you have the chance of catching a big turn that may even last weeks and months making 500 pips + with no worry - simply because what ever happens its a "win win" . My best so far this year is on the EA on a scalp sell on March 12th at approx 5500 - and so far have 550 pips of profit locked in it - and yes - I am a scalper ;-)

Regards

F

Forexmospherian said:

...as a successful intraday short term / scalper

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if you say so yourself F, 'cause no-one else here believes you
Oh the power of positive verbal reinforcement

Not all is dross on T2W

Quality posting from Mob and Slap. Those contemplating trading for profit would do well to read carefully the postings from the two guys.

Very rarely, just in case you need to confirm something you are seeing and are not sure about.

Let's say in 95% of the cases (if not more) you must be able to only read the price signals and come to the same conclusion as the indicators without seeing them.

I suppose if you feel more confident using them just use them, they don't do any harm I guess. But be very aware that none of them bring anything productive to the table, nor predict the future. Therefore your trading results are not going to suddenly become positive because of this or that indicator.

No one has mentioned proper leading indicators - and I don't mean Elliots Wave or Fibs - I mean divergence on oscillators and even a basic trendline on a 1 or 5 min chart.

There is no way I can work of 3 - 7 pip stops in FX with a pure naked chart.

I would probably need stops of 10 -20 pips and that would ruin my RR's - and more than likely on those size stops I would have a lower win ratio as normally in FX scalping any movement more than 5 -7 pips in the opposite direction to entry - is another trade and basically says - you have got it wrong.

My favourite hate saying is basically - trading is simple

Sure is if you want simple results ie break even or under 40% per annum

But if you want high returns - with high win ratios - good RR's - multi trades and tight stops and quick efficient trades - you then start to see naked trading is just letting you down - even if you have 2 decades of experience behind you - you are still missing out


Regards


F

Hi FoMo,

Forexmospherian said:

No one has mentioned proper leading indicators - and I don't mean Elliots Wave or Fibs - I mean divergence on oscillators and even a basic trendline on a 1 or 5 min chart.

Click to expand...

Please define a 'proper' trading indicator? Ideally, compare and contrast this with an 'improper' one so we can be clear as to which is which.

Forexmospherian said:

. . . My favourite hate saying is basically - trading is simple

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That's only half the saying! 'Trading is simple, but it isn't easy' is the complete saying. I've always understood the 'simple' comment refers to the mechanics of entering and exiting trades which, for the most part, is indeed pretty simple.

Forexmospherian said:

. . . Sure is if you want simple results ie break even or under 40% per annum

. . . But if you want high returns - with high win ratios - good RR's - multi trades and tight stops and quick efficient trades - you then start to see naked trading is just letting you down - even if you have 2 decades of experience behind you - you are still missing out

Click to expand...

It would be helpful if you could post a chart to illustrate your point. I'm not part of the anti-indicator lobby and believe that they have their uses when used judiciously. The issue with them tends to lie with the trader and what s/he expects of them - rather than with the actual indicator itself. However, I struggle to see how naked trading can 'let a trader down' (assuming said trader is happy with their ability to read a naked chart) and am very sceptical about your assertion that indicators make the difference between paltry profits of up to 40% P/A and the telephone figure returns that you claim to make!
Tim.

HI Tim

Away from home still today but will be back tomorrow and can then give you some examples of how certain indicators can give an additional "edge" over using naked charts - especially for short term intraday FX trading.

I can only pass on my experience from forex trading - as over the last 11/12 yrs have not traded any other instruments.

With regards to the numerous standard indicators available on most chart platforms - we know that most are lagging and for example MA crosses or MACD changes happen well after the price event - and so are really no good for real time trading.

For longer term swing traders using 50 -100+ pip stops and after 200+ pip moves - yes than naked charts may be OK - as accuracy of 5 -10 pips either way is not so key and if traders are only taking a few trades a day or week - then they might be happy with 40 -60% win ratios and 3 % - 8% net per month using either 1 or 2% of their retail capital as trade stakes.

However - to increase your returns - you will need improved win ratios - larger RR returns( smaller stops) and of course more trades ie multi trades per day - even if you do not take the benefit of using session wins for compounding.

For me all that points to accuracy - and of course advanced money management - that yet again certain indicators can assist you and help you with your decision making. -

Price alone is not just the key for me - as price is just at one point of time - you need price structure in relation to both static and dynamic S & R - and even supply /demand. Many trader ignore wave movements in larger moves -and so use wider stops. I can basically follow every pip move and then at high probability times - extrapolate or project the next 10 -30 mins by using my indicators- and for me that's as long as I need to sometime catch a trade with an RR of 3 or 4.

A few of those a day and then you do get the telephone number returns ;-) - Although saying that my home phone number as 9 digits and I am quite happy on 2 digit returns - 25 -50% per month on capital accounts under $50k.

I must also say forget the ongoing compounding - tried it - and for me I just could not make it work as my financial "wall" just kicks in too early - ie cannot take $5k losses in under 30 mins - even if it is also possible to have $20k wins - my mindset is only comfortable with losses under $1k in under 30 mins - using my own money - and do i want the palpitations at my age - lol ;-)

More to follow


Regards


F