Indicators can be useful in very specific setups. The problem with them is that we normally don't set the environment for them correctly.
i.e. the Fibonacci indicator, as OP mentioned it is very difficult to make it to work because it relies on a starting point that the trader has to set manually. the indicator will give different ranges depending on that specific starting point that we have to use as an input. So if we set that starting point wrong, the indicator will give us wrong signals.
Take that example and you can apply it to pretty much every indicator, they will give you false positives or wrong signals if the environment for them is not correct.
One way that I found that could help is to set first a multi time-frame chart, let's say weekly, hourly and 5 minutes charts. Then you can see the general behaviour of the market in a much clearer way, so your indicators will start to make more sense after seeing three different points of view.
Can you help answer these questions from other members on futures io?
s&p does care about history I see it every day. Here is an example from today:
premarket above yesterday's high (green horizontal line)
tested it failed
went to yesterday's low (red horizontal line)
tested it and bounced
going to yesterday halfway back (blue horizontal line)
looks like it may be failing even reaching that (we will se) so back to the low
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three86- you are absolutely right- I was referring to indicators based on price history. Levels are incredibly important because they represent prices that will be defended by large position holders until the fundamentals of their trade are no longer valid.
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ah gotcha that goes for some averages as well. On the daily chart I posted there is also that 20 day simple moving average. I have it tuning from red to green depending if price is above or below and yellow if it is breached (and also the center of the bollinger bands). You can see that price touches 20sma, or doesn't close above/below it, and when it breaks through it is a big event with a retrace. I will agree that is kind of voodoo, at least in this case tuned to what is being traded, and possibly only works because enough traders give a damn about it. But it is still something I like to watch. My main goal for the anchor is only trading in the "right" direction long or short and knowing when to not be long and not be short. For scalping and swing it makes it pretty clear that from 1/9 to 2/17 that I should only trade long, from 2/17 to 3/21 only short, and from 3/21 to present only long. And specifically for the run up of the last few days there was a 6 trading day "warning" that it wasn't a safe idea to be short. Getting safety, trade direction, and what to trade out of the way lets me concentrate on: position sizing, entry and exit and also makes them minor details.
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Don't misunderstand me please- I'm not preaching- just opinionated! I've been humbled repeatedly over the past 25+ years of trading using combinations of moving averages, oscillators, bands and most forms of TA. It wasn't until I stumbled on (imho) what drives market- large traders and institutions- and how to track their footprints that I became profitable and stopped being fodder for smarter traders. For me, volume profile, levels, order flow, 50% and 100% retracements and extensions (not Fibonacci), and VALUE (what institutions look at) are what works. I would be genuinely fascinated to find someone using just traditional technical analysis tools and be profitable over the long term. The problem with (and holy grail of) TA is finding something that works in trending and non-trending markets. It might exist, but I doubt it. Profitability was a hard-fought long battle for me. I hope it doesn't cost other traders what it cost me to get there.
Best of luck-
The following 7 users say Thank You to dan1957 for this post:
I hear you but I don't think it is correct to blame (or praise) technical analysis or indicators for profitability or loss. If it doesn't work for you I believe you but it is hard to know if you can save someone else from what doesn't work for you. Back to the driving analogy that is like blaming your speedometer for driving off the road. It said you were going 10mph under the limit but the road curved right and you insisted on driving straight.
What works is up to the person (or computer) doing it. I don't care about most things in trading including order flow, what I think larger or other traders are doing, most financial or technical analysis because I am ok with that coming to me via price. That doesn't mean I don't think it can be useful just that I personally don't need it and see it in the price with the "why" following.
The history of that price action (and indicators of it) is memory of it like the road. Eventually everyone learns to turn with the road or give up. The difference in trading vs driving is that you can't see the road ahead. It is like looking out the back window while driving. It is awkward and crazy but it doesn't mean that you can't react to turns in the road to stay mostly in the correct direction. Scalping is like trying to find just a piece of straight section of road and swing trading is like not caring if you temporarily drive off road eventually the road will come back or you have to stop the car.
In regards to trending or non-trending that depends on timeframe. if you are on the right side of the trade then you are on the right side but how long you are on the right side may change. When trending I have less trades but longer trade duration and in chop I have more trades but shorter duration or vacation.
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Also I agree about understanding how the market "works". With s&p, bonds and bigger names it is similar but not the same because it is so massive. Which I think makes it easier and safer to trade.
For individual companies I would probably use much different technique for better results. For example I have shares in a company and because of the daily volume I have only been able to sell half of them so far since September. I could dump the price daily if I felt like it but it is better to take my time selling at a reasonable pace that the market can absorb. Other participants might be doing TA, financial or whatever method to try and figure out what is going on or where the price is going but it really is mostly just up to me and what I feel like doing. Understanding how that works is important and then multiply it by all the people and computers trading whatever it is. That gets chaotic but fundamentally it works the same with emotion creating the trends.
I would not say Indicators are a complete waste of time. At the end of the day, trading is unique to each individual (everyone’s perspective is very different). I.E. one may want to go SHORT the S&P500 because it’s at a supply zone while someone is LONG because they have a EMA 9/21 crossover. It can work EITHER WAY, there is actually no right or wrong way. If it works for you, continue to refine the edge (always adapt to the market).
I used to have a bunch of indicators on my charts too, and after simplifying my charts with only some key levels and zones, trading has been much less noise, you execute better, and you hesitate less.
At the end of the day, some uses multiple indicators to trade while someone has a naked chart. TRADE WHAT WORKS FOR YOU!
Your analysis is always the best analysis.
PM with any questions about Cannon Trading (800) 454-9572 (310) 859-9572. Trading commodity futures, forex and options involves substantial risk of loss. The recommendations contained in this post are of opinion only and do not guarantee any profits. These are risky markets and only risk capital should be used. Past performance is not necessarily indicative of future results.
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If you, or anybody else can do this, then you are the best!. I am, also, looking at real time sales by watching the bid and the ask sizes to see which way the big
"smart money" is betting. It is not that easy, but it does give some indication as to what is going on. BUT for a longer time frame trading is almost useless. In my
trading I only use two indicators and the Heiken Ashi for the candlesticks. I do not trade any time frame less than the hourly, because I only trade options.
