Yes, of course, an indicator such as a moving average, lags price. But, in the sense of looking for a potential setup, they can also forecast. The attached chart is comprised of Renko bars which are based on price change rather than time. The setting here is 6 ticks, or 3 pips. I like Renko bars for setups because they smooth out the price action vs time bars and show support and resistance very well. Much less noise than time bars, which I like better for refining entry. The text shows 1) a higher-high (HH), lower-high (LH), lower-low (LL), higher- low (HL); 2) the duration of each wave; 3) the total volume of each wave. The chart shows a signal in the ellipse at the yellow bar, which is the alert. Alerts occur several bars following the high or low, because the wave doesn't complete and then the next wave start until there is at least a two bar reversal. This gives later signals since it's several bars after the actual reversal but it cuts out a lot of noise and gives more relevant signals, so it's a trade-off - later entry but better signals. On the right is the histogram for volume-by-price, or Volume Profile (VP), for the last six days. The yellow area at bottom is the Value Area (VA) where 70% of the volume at price occurred over that period. The brown horz lines are the Rejection Areas, where the least amount of volume occurred during this period, where price was quickly rejected and (usually) reversed. On the left is the VP for the current trading session. The yellow area and white horizontal lines are the VA for the session, the yellow horz line is the Volume Point of Control (VPOC), the price at which the most volume occurred during the session. From the far left to 1, there is a strong uptrend of 197 ticks. From point 1 to 2, price struggles, the waves more brief on declining volume and gaining only 58 ticks at the high, at 2. Here price has formed a wedge, is well-above the VA high (for the session at the time) late in the session, at the high of the day and at one of the 6-day rejection areas. In the 4th pane is the Delta Momentum 5-period simple moving average. Note the strength of the MA during the uptrend to point 1. From 1 to 2 it forms an apex and considering we're in an uptrend and the aggressive buying momentum is declining while price gains, there's a clear divergence. The price/wave volume behavior and the Delta tell us price is either reaching some kind of equlibrium or becoming overbought, so we can expect either consolidation or reversal. The final wave is on considerably higher volume while Delta momentum MA forms a lower-high. This is the signal - Higher-high, higher volume, DMMA lower-high, based on Wyckoff effort vs reward with the Delta added because I think it's a good way to gauge the force of a move that, who knows, Wyckoff might have appreciated. Anyhoo, back to the original point - the divergence of price and the indicator, considered with other criteria I've mentioned, are actually forecasting, or at the very least confirming, possible price action. So, in that sense, not so lagging. Harold
WOW, you have much working there, you make consistent money with that? Thought I looking for Rod Serling to come in with " It is an area which we call the Twilight Zone." Am guessing Wyckoff would ask where price bars were. Only thing that does not lag is price. Yeah your chart page reminds me of me in early stages of learning how to trade, thought if I made something complicated that no one had.....I just had so much working, it take too long to make decisions, one would contradict another. Price and maybe two indicators, SMA and Bollingers, you just learn Price and what an indicator should be doing during different patterns and when it divergences it is more reliable. LOL, can you forecast whether your heart be beating five minutes from now? no, so anyone who says something forecasting is not true, and "very least confirming, possible", when you stick in word "possible" negates confirming. Divergences can sink your account cause in very strong trends, divergences will clean you out with sustained trend that will make higher highs that only break recent highs by few ticks and retrace to do again and again. But am a scalper so I only want to trade so long for small Goals. I prefer lag actually.
Cute semantics. If you know of any market condition at anytime that doesn't have several possible outcomes, by all means let us know. Confirmation refers to price/volume behavior and the indicator meeting the specific criteria relative to the setup. I would have thought that obvious. Hence the position only taken when the "strong trend" is showing signs of being not so strong. Or did you skip that part? It's kind of the essence of the analysis. The criteria is to look for a possible (oh no, there's that word again) overbought/oversold condition above or below current value at longer-term significant support/resistance low-volume rejection areas.
perfectly said, I do respect people when they put everything in logical manner. most indicator would give some lagging, the key is dont depend too much on it. nobody would able to predict the future, as none indicator would give accurate indication where the market gonna be. simple case : how we forecast the rain gonna fall ? by indication : there's cloudy one, a change with air humidity. it all began with rain drop act as first act, and then rain comes in wave. many trader may avoid to use indicator, and turn into naked trading such price action. in my opinion no matter what trading system they use, trader still use indication such market price movement, a change in volume, rise latitude at volatility move. first rain drop are the ignite price action, as few people wait for first wave confirmed then put entry trade. it all depend on individual traders perception, decision. in fact most people do like rain, but only a few who really love to get wet.
Indicators are a crutch for me but thats ok as a crutch is necessary for the wounded. Its all right there in price but i need to frame it to better understand the probabilities of a setup. Specifically, a lower BB20 touch, in trend , alleviates some doubt , provides some context,( there is that word again), and helps me to pull the trigger. There is zero predictive value in that. EURUSD is driven by global macro fundamentals and the needs of the largest Players in the world. That stuff is harder to learn and follow than indicators are. My 1 cent opinion.
Conformation is past tense, it has already confirmed an occurrence and it is not a possibility, I thought that was obvious. So it comes down to definition of strong trend or distance of what the mean of trend swing and breakdown of when "mean" ends and taking continuation trend trades thereafter.
The thing we know for sure is that a lot of posters on ET don't know about things that they think they know about.
All paths eventually lead to THE price drivers. Since this is a TA "works" thread, Surf is sure to arrive.