Do more experienced traders trade against indicators?
For example why not fade the stochastic indicator, which I think is common for newer traders to use. By watching for rejection in the order book, after a "signal" created by the stochastic", you could just buy/sell false moves created by lots of newer traders getting caught on the wrong side.
A problem with this thinking is that the worst "signals" give you not 10%, not 20%, not even 40% win rate. They give about 50% win rate on 1:1 r:r.
If you can find a 20% win rate you found a kiler system.
The following user says Thank You to baruchs for this post:
Firstly, most indicators used in isolation have about a 50% success rate. So if you're trading with them or against them, you're coming out at the same result.
Secondly, you're right to consider what professionals do. What you will find in the vast majority of cases is, professionals do not use indicators. They trade structure, context, environment, market state. They may use tools to aid them in identifying those items, but they certainly do not trade indicators. They have zero interest what the macd is doing. They have zero interest in what the stochastics is doing.
Personally I would suggest leaving indicators behind and start learning to read the market. Just my opinion.
You donít trade the markets; you only trade your beliefs about the markets.
- Van K Tharp
The following user says Thank You to DarkPoolTrading for this post:
When I was starting trading I used to look to MACD and stochastic. After learning from a professional, he had no indicators. He read the volume in the action of the price. So I am currently trading charts with the price and it has been 11 months of good trading.
The following user says Thank You to fyd49 for this post:
Your question assumes other traders use indicators to trade off......maybe in the 90's this was true but most don't use them anymore as they no longer work....that can be proven by doing back-testing.
Hence I doubt that many would be trading this method live anymore.
+1 to DarkPools comments - he hits the nail on the head.