Advice Against Using Indicators

[ImogenBeaumont]

Hi rustic.

The shorter the better (KISS) but really depends on time-frame.

Also some folks insist on confirmation from several indicators not realising that some of these are tracking same charcteristics: repetition is not consensus.

Do you advice against using the indicators?

 

[tomorton]

Do you advice against using the indicators?

I advise against using them to pinpoint entries and exits - only as confirmation of market bias.

I advise against using multiple indicators with the false idea that this forms a strong concensus.

If a strategy really needs an indicator, that one indicator is enough.

 

[ImogenBeaumont]

I advise against using them to pinpoint entries and exits - only as confirmation of market bias.

I advise against using multiple indicators with the false idea that this forms a strong concensus.

If a strategy really needs an indicator, that one indicator is enough.

That makes sense! So, it’s better to just use one indicator for confirmation instead of a bunch? How do you figure out which one to rely on?

 

[tomorton]

That makes sense! So, it’s better to just use one indicator for confirmation instead of a bunch? How do you figure out which one to rely on?

You select the indicator most likely to be a good fit for the strategy you have selected, but there are only three common off-chart indicators - RSI, MACD and stochastic oscillator. Having done that, it is more important to continue to use that indicator with those settings than it is to continually edit it or select others for a better fit.

 

[ImogenBeaumont]

I’ve heard of RSI, MACD, and stochastic, but how do you decide which one works best for a particular strategy? Is it mostly about the market conditions, or the timeframes you're trading on?

 

[steven46]

Hello Imogen

I understand the interest in finding indicators that will help you.

What I suggest humbly is that indicators are a distraction. The tools
that actually work are based on an understanding of repetitive patterns
that occur on several time frames. As an example, I suggest you look
at whatever market you wish to trade, on a hourly chart first. looking
for the timing of price moves to various highs and lows. If you are observant
you will discover that price creates highs and lows at times that correspond
to what I call "timing windows". These windows are based on NY time (EST)


1) Asia window = 8pm to 11pm EST
2) London window = 2pm to 5pm
3) New York window = 8am to 11am

Evaluation of the way price acts during these window is step one (1) of the
process I teach. The next step is to learn to recognize specific patterns that
signal whether price is going to continue, reverse or go sideways. This is all
very basic of course. It does take a bit of time, but then it pays you back later.

Step three (3) is to learn where to enter, how to manage the trade, and where
to exit..

I hope you will consider this as a possible way to approach the markets generally
It may save you time (and money) in the longer run.

Good luck

 

[tomorton]

I’ve heard of RSI, MACD, and stochastic, but how do you decide which one works best for a particular strategy? Is it mostly about the market conditions, or the timeframes you're trading on?

All three work on all time-frames and all have adjustable periods anyway. Don't worry you might pick the wrong one, that's not how they work. Pick your strategy first and then pick an inidcator if and only if that strategy demands an esential input from an indicator. Stick with that indicator.