Hey guys, I'm a relative noob trader, blew up a really small account and dumped myself back on demo for a while now. I've been focusing on day trading US Equities. Earlier on when I blew up my small acount, I tried to keep things simple by using trade patterns and learning how to read the tape. After reading up a lot of books and so forth I have started to add some indicators in. I was not, and I'm still not, looking for the holy grail, just a few items that would help me confirm my style of trend trading and reversals. So far the indicators that I have are the Bollinger Bands, MFI, Accu/Distr, MACD Histogram, and Bollinger %b. This on top of me drawing out the R and S and trendlines as well. I find it very messy and would like to simplify things but I'm not sure what to do. I don't really like the MACD as it seems relatively slow in confirming trends. I intend to keep the Bollinger Bands for volatility andI want something for Volume and Momentum. Any thoughts?
As an alternative, you might want to consider designing your own indicator(s). Some of us have found the exercise edifying. I personally have little use for any of the publicly disclosed indicators. They are all flawed, sometimes hugely, in some manner. You can safely get rid of MACD; the hoops you have to jump through to make it usable aren't worth the effort. Good luck with your research.
I been trading since 1978, so I have a tad of experience. I am both price pattern and indicator skilled. You watch indicators for so many years, after awhile don't even need them on chart as you can see them through price. All I have on my charts now is BB and volume, no sense in you learning about going against the trend as you have to get very good first trading with the trend. Let price be your mom indicator. Use trendlines to show S/R. Learn all you can about volume. http://www.swing-trade-stocks.com/stock-chart-volume.html http://www.incrediblecharts.com/technical/volume_patterns.php http://www.chartpatterns.com/symmetricaltrianglechartsstocks.htm http://www.chartpattern.com/cf/images/new/articles/stocks-comm-2003.pdf and these two books are great on Price: by John Hill written in late 70's, Stock & Commodity Market Trend Trading by Advanced Technical Analysis and Scientific Interpretation of Barcharts.
The thing is I'm still very very new so I'm not sure how I would go about designing my own indicators. I think it would be great though cause the process of developing it would definitely help my understanding of how to trade. Yeah I was looking through my older trades and the MACD Hist. just feels like it lags so much that it didn't help confirm anything at all. I was maybe looking at Stochastics but I really want to avoid adding so many things in.
Yeah I'm learning to just trade with the trend and sit out and wait out for good potential for reversals. Day trading wise this has helped me and reduced my trading but I still get trigger happy. Luckily I'm still on sim Thanks for all the info Handle, I'm going to get on top of it! For volume, I'm using MFI and Accu/Dist right now for confirmation but again, it feels like I'm having a lot right now. What are your take on these volume indicators?
I use three custom indicators - one counts things on the tape, one does some linear regression math, and one is a more statistically rigorous take on Bollinger bands. Bollinger band (or my custom take) are modestly interesting to look at, but I've never seen any evidence in testing that they have any predictive value - I mostly keep them to autoscale my charts. I've never had any luck with trendlines or MACD. MFI and accumulation/distribution are OK ideas I guess, but pretty stupid in the modern era since you have the tape handy and can just count up transactions.
I love that pic too. really messy, confused and clueless. need some magic to figure out the best indicators you trust and happy to live with.
It all depends on what you are wanting the indicators to indicate....and if you cant answer that why would others be able to. otherwise its a lucky dip
I don't use them, couldn't ever test them well enough to fit my win/loss rules. I strictly use actual volume, as price goes down, at some point vol should increase and as price rises volume should decrease, if I can't figure out what volume is doing, time to get up and take walk around the house. Whenever you have that "need" to put on happy trades, write them down and you will always see you have more losses than gains. Sure way to be one of the 95% losers.