William Eckhardt

[Lord Flasheart]

Lots of good arguments been posted, very few mention involvement of emotion. Any indicator can be used to great effect if combined with an emotional opinion based on experince. For example you may get exactly the same signal twice but may chose not to take one because it is too close to the open/close of the market etc. No backtesting can allow for emotion so indicators look fallable. I like the comments about joe de Napoli. How do we know he has made millions. I say the same about all so called mentors, very few prove live that they can trade.

 

[daxdaytrader]

Daxdaytrader,
I'm really not sure if you read and/or understood my earlier post. :?:

Hi, yes I read it all, but I don't think it challenges what Eckhardt is saying.

You most certainly can get indicators to FIT a set of data, but that is not the same as having something that is a model of price in general. You may get good signals for weeks or months off such indicators and then they will fail.

My next objection is that these indicators you mention are highly proprietary, the guy probably designed them with HIS own great expertise. We are talking about something quite different from the RSI and STOCs you can throw up on a standard charting package.

Once again it is the expertise of the analyst that gives the system its success, not the indicators.

Once again, if you know anyone (non expert) who can just put some ordinary indicators together and make millions off them, I'll be surprised, and wrong!

 

[nine]

Once again, if you know anyone (non expert) who can just put some ordinary indicators together and make millions off them, I'll be surprised, and wrong!

I don't know anyone "non-expert" who can just put price bars, candlesticks, lines etc and just make millions of them.

Why would I expect anyone to do the same with indicators?

This is a game where (unless purely lucky) a number of different experiences must be absorbed and knowledge and skills built to get to the making millions point.

 

[Splitlink]

I agree with Eckhardt because trendlines must be constantly redrawn to adapt to new conditions. We draw them to suit ourselves. I use them after I have entered the trade to tell me that I am on the "right" side and that I need not worry while it is. To use them as a sell or reversing signal is, IMO, a waste of time.

Indicators based on price averages ie. most of them, can only be accurate as long as the cycle in which they are drawn remains the same. This is rarely, if ever, the case, is it? However, since it is human nature to want some kind of reassurance by using them, I fear that the various schools of thought surrounding the mysteries of trading will, always, include them and many of us will swear by them. Bar charts are the closest to reading the true state of the market and even they are history but they do, at least, help one to establish an exit and that is, I believe, the most important part of successful trading.

Whilst I wish to make clear that I am, still, struggling to perfect my own methods I feel that the load is much lighter if indicators are not included and if I was to include them in my calculations I believe that I would be making matters worse, instead of better.

Jack Schwager, in his other book on TA, analyses most systems known to traders, and finds most of them wanting. In the final anaysis the trader can only save his bacon by getting out at the right time. How can an indicator based on i.e. 20 bars, do that quicker that interpreting the reading of a bar, itself?

Split

 

[newtrader22]

Gerald appel is using his Macd for decades and he has made multimillions,
George lane used and invented stoch decades back and very sucssessful,
Dr. Elder is using only and only indicators and is.........
The list is long. Philosophy is one thing Trading another. What is common to the
above mentioned gentlemen is that they are wedded to the system they have and are
not divorced from the system(indicators). They love their indicators more than their
wives.. and trust them. Therefore they are successful and have millions.

newtrader22

 

[Charlton]

I agree with Eckhardt because trendlines must be constantly redrawn to adapt to new conditions. We draw them to suit ourselves. I use them after I have entered the trade to tell me that I am on the "right" side and that I need not worry while it is. To use them as a sell or reversing signal is, IMO, a waste of time.

Indicators based on price averages ie. most of them, can only be accurate as long as the cycle in which they are drawn remains the same. This is rarely, if ever, the case, is it? However, since it is human nature to want some kind of reassurance by using them, I fear that the various schools of thought surrounding the mysteries of trading will, always, include them and many of us will swear by them. Bar charts are the closest to reading the true state of the market and even they are history but they do, at least, help one to establish an exit and that is, I believe, the most important part of successful trading.

Whilst I wish to make clear that I am, still, struggling to perfect my own methods I feel that the load is much lighter if indicators are not included and if I was to include them in my calculations I believe that I would be making matters worse, instead of better.

Jack Schwager, in his other book on TA, analyses most systems known to traders, and finds most of them wanting. In the final anaysis the trader can only save his bacon by getting out at the right time. How can an indicator based on i.e. 20 bars, do that quicker that interpreting the reading of a bar, itself?

Split

I would agree - indicators are derivatives of price and volume. Admittedly for many they provide a representation of price action, which they find easier to absorb and process.

I use only the underlying price action. Indicators I believe isolate you from the underlying market. As raised by DB on another thread about candles, the best way to understand candles or price bars is to watch them develop in real time. Watching price action in real time develops a sense of how the market moves. You observe not just the levels at which prices are set, but also the hesitations and the acceleration/deceleration in price movements. Also follow along with Level 2 and you see how the order book compares to the actual trades carried out.

This develops a touchy feely aspect to the markets.

It develops a sense of how time is played out in the markets.

All this is isolated by indicators. It's like watching TV instead of experiencing life, buying food in a supermarket without ever visiting a farm or reading a porn magazine without ever having had .....

It's better to get your hands dirty

Charlton

 

[nine]

The no-indicators school is just another approach to the markets but it seems to attract a sort of snobbery, arrogance, and self-aggrandisement amongst its practitioners. Yet another bunch of traders saying "your way doesn't work" or "my way is best."

If one way was best or the only way the markets wouldn't work at all.

Indicators can be useful. The two most obvious uses are to smooth out chaotic action and to show loss of momentum. Eckhardt, if he's still system trading is effectively using "indicators" (X day breakouts or some other statistically robust derivative of price and volume action).

I have studied the price action of the Hang Seng futures contract for nearly 3 years now and I certainly take my entries and exits based on price action and my understanding of how price will react in a variety of situations (my setups). But despite this I retain a CCI on my shortest timeframe chart and MAs and two stoch's on my primary chart. The CCI provides a good indicator of loss of momentum in a thrust. The mas have been selected by market action and still, after 2 1/2 years since I settled on them reflect the regions at which retracements are likely to end. The stochs remind me that when certain things have happened this retracement is probably not complete enough.

I could trade without the Stochs (easiest), the CCI (no big thing) and the two mas (that would hurt) but they make it easier to perceive and react to what is taking place at on the chart. So they will be there as long as they improve my profit or make trading easier.

I hope all schools of thought have some great trading in the week ahead --- but lets get over the "only my way works" snobbery.

 

[Splitlink]

Gerald appel is using his Macd for decades and he has made multimillions,
George lane used and invented stoch decades back and very sucssessful,
Dr. Elder is using only and only indicators and is.........
The list is long. Philosophy is one thing Trading another. What is common to the
above mentioned gentlemen is that they are wedded to the system they have and are
not divorced from the system(indicators). They love their indicators more than their
wives.. and trust them. Therefore they are successful and have millions.

newtrader22

Indicators must, by their very nature, lag the market. I don't doubt that the people who you mention have made millions. These are exceptional cases and I would not wish to decry their successes. However, I suspect that they made their money in conjunction with something else, of which we are not told. Otherwise we would all be wealthy.

I believe that if I ever get stinking rich by trading, it will not be by using indicators based on averages. In the meantime, I prevent myself from going broke by not using them, but price action based around observations of the bars.

Split

 

[Splitlink]

The no-indicators school is just another approach to the markets but it seems to attract a sort of snobbery, arrogance, and self-aggrandisement amongst its practitioners. Yet another bunch of traders saying "your way doesn't work" or "my way is best."

.

The no-indicators school may consist of snobs, if you wish, but I can assure you that if I had found a more efficient way of getting into a trade by using indicators, I would be doing so.

I found that they are more of a comfort thing for those who require confirmation. For right or wrong, I found that I was always late in entering and late in getting out. What does that mean?

I was losing money.

I do not need, when my shares are going up (or going down) for, a few bars later , to have confirmatioon of that fact. My account and profit /loss will give me all that information.

There is nothing arrogant, surely, in saying that one believes that a price is moving in one direction and, if wrong, getting out of the trade without waiting for confirmation?

Split

 

[nine]

Here we go again though ... I can't do it so its wrong.

So, ok, I have to add the "couldn't master indicators" group to my categories. I can live with that.


But the fact that I can't play golf to save myself doesn't mean that others can't.

 

[daxdaytrader]

Gerald appel is using his Macd for decades and he has made multimillions,
George lane used and invented stoch decades back and very sucssessful,
Dr. Elder is using only and only indicators and is.........
The list is long. Philosophy is one thing Trading another. What is common to the
above mentioned gentlemen is that they are wedded to the system they have and are
not divorced from the system(indicators). They love their indicators more than their
wives.. and trust them. Therefore they are successful and have millions.

newtrader22

Hi newtrader,

Perhaps you're missing some points here I think, yes most if not all pros will use indicators and other TA, no doubt. But what Eckhardt &co. are saying is that they are of very little value (i.e. they don't make good trades). People believe when they start trading that they can just use indicators and TA - fact is you need to understand the structure of the market, i.e. what participants are driving the market, how strong they are and the prices they traded and the value they are looking for.

But you discover something intersting when you read into things more. Most indicators can be selected to win around 40-50% of the time, even over very long periods, some can do better. However many of the top traders in the Market Wizards book, only win 20-30% of their trades. It's what they do with their winners and losers that makes them rich, not what they do with the indicators.

What I have been trying to say (as with Eckhardt) is not that indicators have no value, just that the value is smaller than many people appreciate.

When I start trading I didn't understand indicators and just used to try and go with direction. I actually did better with this than when I started to try and trade with indicators! Later I discovered that you can trade just using Market Profile, and no indicators or even a live price feed, and still take better trades!

 

[Splitlink]

Hi newtrader,


What I have been trying to say (as with Eckhardt) is not that indicators have no value, just that the value is smaller than many people appreciate.

!

Is that what he said?

According to post#1, he said this:

Just reading The New Market Wizards (Schwager) and was surprised at some of Eckhardts comments. I think he is right that stoc/RSI and other indicators are nearly "worthless", as are many "systems", and that random walk is bunk.

However, his claim that trend lines are bogus seems dubious to me. He says this is because of the time scale. However trend lines are drawn across highs or lows, so the scale is irrelivant, the touches will be at the same points in time.

Split

 

[daxdaytrader]

Is that what he said?
According to post#1, he said this:
8<
Split

Echhardt says nearly worthless, I said of little but not of no value. That sounds about the same to me. I suppose this discussion has suffered from a lack of crisp definitions - what some people consider as working, is different from what Eckhardt is talking about.

Like Eckhardt, I am skeptical until someone proves their case, and like Eckhardt I see abundant evidence that they do not, and cannot work beyond giving some limited ability to time entries.

The onus on those who believe otherwise is to prove their case with real statistics, and not wishful thinking, or out of context quotes.

Most the time indicator fanatics will take some very limited sample of the equity curve, fit their favourite indicators to it, and then say that that works. So you have a model of past behaviour, and not a predictor of future behaviour.

 

[nine]

Still lots of sweeping generalizations, name calling (fanatics) and other devices that have little to do with proof on your side. Again, just because you can't make something work doesn't mean that others are not more able than you. See my golf example.

 

[Splitlink]

Still lots of sweeping generalizations, name calling (fanatics) and other devices that have little to do with proof on your side. Again, just because you can't make something work doesn't mean that others are not more able than you. See my golf example.

Well, I'll be blowed! (note my mild language ). Didn't you suggest that I was arrogant and a snob?

Split

 

[nine]

Actually this whole thread is a bit off.

1. Eckhardt didn't attack trend lines ... he attacked angles on charts (ref NMW p 110) and liked trend lines. I think he was having a slap at gann fans.

2. He also rejects chart patterns (98% don't work, p 113). How many double/triple top and bottom (and 2B patterns) buyers would disagree with that? What about flags in a trend?

3. He rejects buying retracements (p119).

4. He thinks popular overbought oversold indicators are nearly worthless (but doesn't comment on others) but he only rejects them because he couldn't make them work with his computers. "What they make during market consolidations they lose during trends" - which implies that he tested overbought sells in trends ... something I hope most of us would already be avoiding.

I seem to recall he also felt that most traders made the mistake of trading support and resistance rather than chasing emergent trends but I couldn't find that bit.

Edit for split: Absolutely: just because I use the device doesn't mean I shouldn't point it out when it weakens someone else's argument. However, in my defence: 1. I said, "seems to attract" rather than "all of you are" and 2. recognizing your issues I have had to add the "couldn't master indicators" group to my categories ... so you are obviously neither arrogant nor a snob

 

[Splitlink]

Edit for split: Absolutely: just because I use the device doesn't mean I shouldn't point it out when it weakens someone else's argument. However, in my defence: 1. I said, "seems to attract" rather than "all of you are" and 2. recognizing your issues I have had to add the "couldn't master indicators" group to my categories ... so you are obviously neither arrogant nor a snob

That makes me feel better. I thought, for a minute, that I would have to change my name to that of one of the Greek philosophers

 

[daxdaytrader]

Still lots of sweeping generalizations, name calling (fanatics) and other devices that have little to do with proof on your side. Again, just because you can't make something work doesn't mean that others are not more able than you. See my golf example.

Kiwi,

The burden of proof is upon those who make a positive proposition - I'm not making a positive proposition. Eckhardt and others, with plenty of expertise, are ready to demonstrate the failing of indicators. And a fanatic is simply someone who has undue enthusiasm - some people are fanatical about vintage cars, some religion and other it seems, indicators. No offence was intended.

You talk about the ability of others, and that is the issue - someone with only the basic rules should be able to make indicators work, if they really provide the edge that people evidently believe they do.

I don't believe that the few percent of would-be traders who go on to succeeed, do so because they happen to pick the right indicators. All the indicators I've seen present very clear signals as to what you are supposed to do - hwo can they "not work" because of the person using them? The signal is either there or not, a moron should be able to trade using indicators.

 

[fibonelli]

"Indicators must, by their very nature, lag the market..........".

Split

Split,

'fraid I disagree.

Indicators such as oscillators can actually indicate the likely direction of future price by their patterns.

nkruger has started an excellent thread on using the stochastic oscillator on the IBEX 35, see http://www.trade2win.com/boards/showthread.php?t=25277

 

[laptop1]

Makes me smile when people down indicators, maybe it's EGO, wanting to look smart, "there is no differents" Example TD REI indictor is to add together the respective differences between the current bars high and the high two bars earlier and the current bar low and the low two bars earlier. These values will be positive or negative depending on whether the current bars high and low are greater or less than the high and low two bars earlier. So it is based on price, no different to trading price.

Then you get the so called traders who say, "I only trade price action." Well, you don't, most wait for a bar to be drawn. Example a 10 or 5 min bar...One would wait for a Doji or Engulfment bar be drawn before they would take action so you are slow on the move, "you had to waite"

Do tell me, what is trading price action only?......