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Indicators are not the answer
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Indicators are not the answer

  #31 (permalink)
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siege View Post
That is what every indicator is... an indicator manipulates the fundamental datasets (price and volume) to produce another dataset...

Why spend all your time on trying to read another dataset when you've got the original and most reliable right there in front of you?

Well, that can be interpreted as you like. I use no indicators to trade. But I use some averages as support to my eyes, because the actual price is a fraud.

Causality is the relationship between an event (the cause) and a second event (the effect), where the second event is a consequence of the first.

Last edited by wh; January 15th, 2010 at 03:20 AM.
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  #32 (permalink)
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siege View Post
What if you had positive expectancy without these indicators? If anything you'd have less to worry about if all you had was price and volume and thats it.

Alot of people claim to trade without indicators on this forum but then they through in a couple moving averages here and there... Moving averages are still indicators!

I never said that you "needed" these things to trade. You could always just trade with a completely bare chart, as I have in the past. Technically, you could just trade with nothing but a price ticker if you knew how to do it.

My point was that these MAs are not just any old indicators that you might choose to use, simply to frame price action for yourself. They are actual, real areas of support and resistance that thousands of other traders are reacting to, so not knowing where they are is exactly the same as not knowing where other areas of support or resistance are in the market. Regardless of whether you use them as part of your criteria for entering/exiting trades (and I don't, personally), it usually helps to know where they are, just like it helps to know where the previous day's high is.

You don't need to know this stuff to make money, it's just an advantage if you are able to process that additional S/R information without getting too confused from information overload.

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  #33 (permalink)
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siege View Post
Why spend all your time on trying to read another dataset when you've got the original and most reliable right there in front of you?

I've tried to get across the simple point, on other forums, that focusing on data representations diverts attention from the far more important issue, which is that they have no idea how to trade. A proficient trader could take just about any charting setup, and after an adaptation period trade it. Meanwhile a newbie trader will lose money, indicators or not.

It's just like a pro tennis player can do ok with just about any racket, while a newbie still sucks with the best racket available. You see? It's about the skill and not the window-dressing. Looking for the chart setup that will lead to success is like looking for the shoes that will make you an awesome basketball player. Good luck with that. You'd be far better off practicing with some comfortable shoes rather than shoe shopping all the time (or shoe evangelizing... "why would you mess with reebok when nike air is the original and most reliable"...)

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  #34 (permalink)
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FBJS,

Thank you, great post as always.
I'm not sure, whether I know complete list of EMAs better to have on chart, I will call it : just to see general direction of the market, but it seems apart from mentioned 2 EMAs there should be more 2 or maximum 3 EMAs.
However I stopped to look what retailers do, as it's really noise, not to offend them and not to tell something bad, I really feel sorry when they got problems, as I'm, in principle amongst them, but retailers never know exactly what is going on market, they always "in between" that's why so much pain, so much losses, a lot of emotions, little certainty and almost complete fear about all that stuff.
I want to repeat I really feel sorry that a lot of retailers falls into trouble, but that is different issue.
So, I just keep 1 eye on their activity or even part of 1 eye - it's not making market
What I'm really trying to do is to find out how to see correctly activity of big money, big money who really trades intraday, I'm not talking about most of institutions with deep pockets, they win mostly due to size of their pockets and some insider info, but in principle most of institutions are in fact quite the same retailers, so it's not worth anything to see their activity, they are loosing money as all others do.
But who's play and games I really want to learn to see, as I've mentioned above, big players who trade intraday or manage their positions intraday as they are those who making all that game, after them go big smart guys like GC, which move and reverse market on more long term basis.
Of course idea is not new and a lot of guys trying to do that, but big money also not so stupid to make show of their activity a lot of their entries and exits hidden inside retailers activity and just sometimes, not always, so price/volume behavior could show what they did or planing to do. That is really how market is working.
They are not feel hysteria, they are not feel greed, fear, because they just trading.
Again, they are not trading against market, they are trading against crowd, "they are selling to crowd what it buys".
I saw their "work" a few times, when all other market enter or exit positions they already did it and often they are at another side of bid/ask.
Of course, seems that pro has their "groups of interest" : bulls, bears, neutral, very big money who do what they need.
Sometimes they fight, i.e. well know bulls and bears, but anyway they has "consensus points" where they are agree with each other so no any fight, of course, seems they are not always bulls or bears, they are not standing as last hero in front of freight train, so they quickly can change their "nature" to make money. Also seems, they has territory which belongs say to bulls and to bears, however again I would not define them just like that.
So, understand their principles and at least some part of their thinking will be really interesting.

Krgds,
Andrew




FBJS View Post
There are two types of indicators: those which you personally choose that help you to view the market optimally and/or make your own personal trading decisions, and those that are "common" to a large group of traders and are essentially self-fulfilling prophecies.

The first types of indicators are optional, because nobody else is really reacting to them, and so it's just your personal preference whether you like to use them or not. The second type, however, are important for everybody to be looking at, even if you don't use them in your personal trading decisions.

For example, anyone who is daytrading without having at least the following 2 EMAs on their charts is at somewhat of a disadvantage:

20 period EMA on the 5 minute
20 period EMA on the 15 minute

You don't have to have a 5 minute chart or a 15 minute chart open, but if you don't have these lines drawn on whatever time frame you are looking at, it's like not being aware of important resistance and support levels that 80% of the rest of the market is using. Sure, you can always detect that a trend is slowing down at these levels using price action or other measures, but knowing where these lines are ahead of time and how other traders will typically react to them is a big advantage.

Now personally, if I was designing a trading system from scratch, I probably wouldn't have chosen these particular periods as being very important, as I think that there are probably better ways to view the market... but my personal opinion in this case is irrelevant, because so many other traders look at these things. Since tons of traders follow these averages and place their orders around them, if you don't have them on your charts you are missing some valuable information about support/resistance areas in the market.

There are other well-known MAs on different time frames that are also used by a number of traders, which become self-fulfilling prophecies as resistance/support areas as well.

So I would say that while many indicators are not really necessary, the more common ones like the two I mentioned are very useful for "spying" on what other traders are looking at and taking advantage of them.


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  #35 (permalink)
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Lynx21 View Post
I've spent 8 years trading professionally in London and Zurich. I've never met another professional trader trading any decent size that relies on indicators that has actually made a career out of trading. The markets are dynamic, indicators are not. Indicators are set to a mathmatical formula, which is pretty useless for intraday trading. Remember that essentially the market is just people buying and selling and the shift in supply in demand is what moves price. If you want to last in trading, and trade more than 10lots (futures) in your trading career, you're going to have to learn how to read order flow so you can actually see for yourself who is in control of the market. The opportunity to trade lays where there is a shift in supply and demand. By the time indicators give you so called 'signals', the opportunity has been and gone, which tends to lead to you getting involved in the move late, leaving yourself open to being squeezed out.... sounds familiar?

Learn how to read orderflow and open interest

I think that this statement goes directly to the heart of the matter, but the problem here is that some people are using different definitions for the same set of words.

When some people say "I think that you can/should trade with indicators", what they are saying is that you should use indicators for your buy/sell signals. Meaning, when one line crosses another line or some such thing, then you enter/exit your position. It is this type of "indicator trading" that people like Lynx21 (and myself) would say is not very useful, especially in intraday trading. As he points out, things move too fast for that type of trading to be very successful, and order flow/price action is what it's really all about.

However:

That doesn't mean that indicators are useless. This is where we get into the second definition of "trading with indicators", which is how I do it. I use a couple of moving averages and bollinger bands to help me to frame the price action / order flow that I am seeing. 9 times out of 10 I will see/feel price turning before an indicator has given an official signal, just by watching the price action itself along with market structure.... but this doesn't mean that the indicator itself is of no use. If used correctly, it can give you a framework in which to interpret the price action, and that can help in certain situations, especially when markets are moving very quickly.

For example, if you have a long and a short moving average, their relative angles and positioning can tell you a lot about where the market currently is, and so when you start to see a certain type of price action occurring, those moving averages can help you to interpret it in context. Do you need them? No. Do they help in any way in generating trade signals? No. But they can help in giving you a kind of "visual shorthand", that at a glance, can tell you what type of state/position the market is in. It is especially useful on a visual level if you have multiple time frame charts up with the same moving average plotted on all of them, as this can visually help to "sync" things up between the charts. Of course, some people find this type of thing confusing because they find that it interferes with their ability to read price action, so if you are one of those people then you should definitely just clear your chart completely and look at only price, because that is by far the most important thing.

Each person has individual preferences for what looks and works best for them. So if you want to use indicators to help you to "frame" price action, then go ahead. But as Lynx21 says, if you use them for your trading signals and try to trade mechanically in some manner, especially intraday, you are going to be in trouble. Even if you somehow could make money this way, you would never be anywhere near as good as if you learned how to read order flow and learned to detect changes in supply and demand.


Last edited by FBJS; January 15th, 2010 at 07:29 AM.
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  #36 (permalink)
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Lynx,
Thank you !
That exactly I've stated above and that exactly I'm trying to learn.
I did already some steps, which shows that, seems, I'm on the right road, but I've not yet structured that stuff and still have some blank spaces.
I've just watched market and noted that when retailers starting to do anything pro already did that and retailers just jumping from on wall to another, pity, but we are doing that.
I've also noted that pro keeps in mind certain levels and ranges, but they are not exactly those what retailers used to think and/or pro often using that in another way.

It would be just great to see you staying here for some time.

P.s. I use a few "multi" MAs just as "indication" of "common" market picture/levels.

Krgds,
Andrew



Lynx21 View Post
Remember that essentially the market is just people buying and selling and the shift in supply in demand is what moves price.
If you want to last in trading, and trade more than 10lots (futures) in your trading career, you're going to have to learn how to read order flow so you can actually see for yourself who is in control of the market.
The opportunity to trade lays where there is a shift in supply and demand. By the time indicators give you so called 'signals', the opportunity has been and gone, which tends to lead to you getting involved in the move late, leaving yourself open to being squeezed out.... sounds familiar?

Learn how to read orderflow and open interest


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  #37 (permalink)
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FBJS,

Thank you for your new post as well, it helpful to get more "understanding"

Krgds,
Andrew


FBJS View Post
I think that this statement goes directly to the heart of the matter, but the problem here is that some people are using different definitions for the same set of words.

When some people say "I think that you can/should trade with indicators", what they are saying is that you should use indicators for your buy/sell signals. Meaning, when one line crosses another line or some such thing, then you enter/exit your position. It is this type of "indicator trading" that people like Lynx21 (and myself) would say is not very useful, especially in intraday trading. As he points out, things move too fast for that type of trading to be very successful, and order flow/price action is what it's really all about.

However:

That doesn't mean that indicators are useless. This is where we get into the second definition of "trading with indicators", which is how I do it. I use a couple of moving averages and bollinger bands to help me to frame the price action / order flow that I am seeing. 9 times out of 10 I will see/feel price turning before an indicator has given an official signal, just by watching the price action itself along with market structure.... but this doesn't mean that the indicator itself is of no use. If used correctly, it can give you a framework in which to interpret the price action, and that can help in certain situations, especially when markets are moving very quickly.

For example, if you have a long and a short moving average, their relative angles and positioning can tell you a lot about where the market currently is, and so when you start to see a certain type of price action occurring, those moving averages can help you to interpret it in context. Do you need them? No. Do they help in any way in generating trade signals? No. But they can help in giving you a kind of "visual shorthand", that at a glance, can tell you what type of state/position the market is in. It is especially useful on a visual level if you have multiple time frame charts up with the same moving average plotted on all of them, as this can visually help to "sync" things up between the charts. Of course, some people find this type of thing confusing because they find that it interferes with their ability to read price action, so if you are one of those people then you should definitely just clear your chart completely and look at only price, because that is by far the most important thing.

Each person has individual preferences for what looks and works best for them. So if you want to use indicators to help you to "frame" price action, then go ahead. But as Lynx21 says, if you use them for your trading signals and try to trade mechanically in some manner, especially intraday, you are going to be in trouble. Even if you somehow could make money this way, you would never be anywhere near as good as if you learned how to read order flow and learned to detect changes in supply and demand.


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  #38 (permalink)
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Thanks for good discussion. Very helpful (to me at least).

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  #39 (permalink)
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If I want to be a buyer of a market I like to wait until there has been more than normal selling activity. If I want to be a seller of a market I like to wait until there has been more than normal buying activity. It doesn't take much on my trading platform these days to keep me happy.


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  #40 (permalink)
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I have spent many years using many indicators, and I'm now down to just a few. I won't go so far as to say they aren't the answer, but you really have to figure out which ones work best for what you want to achieve.

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