2 topics: Indicator Settings and Short-Term Indicators

Discussion in 'Technical Analysis' started by ksmetana, Aug 21, 2010.

  1. I am speaking about equities and futures:

    I have been studying intraday trading for about half a year now. I have spent a lot of time watching charts develop, I've played around with all sorts of indicators.

    I know indicators are good tools to use to develop a trading strategy, but that seems to be all they are to me. Put key levels into your machine, when the market satisfies your conditions, you make your move, with proper risk management. It seems indicators help you build a general case based on closing prices, or you can use many indicators to develop an emotionless trading system.

    To my question.....Say I look at a 5-min candlestick chart with volume and moving averages, then look at various indicators and more often than not there is nothing in the indicators that I don't see on the chart. Sure there are exceptions, like divergence.

    Oh look a big green bar with high volume, oh look the stochastic is now popping up. Doesn't seem to help me here since we had a up move on high volume, of course the up move will trigger the stochastic move. When I see indicators, I don't see confirmation, I see redundancy. We continue up, as I predicted with volume and the strength of the bar. Stochastic now says we are overbought. Ok maybe I'll scale out, or sell. Then bam another huge run up, despite being overbought. I guess what I am trying to say, is that many indicators seem worthless unless you are dealing with TRENDS.

    How can I get more out of indicators on a day to day basis? What indicators are considered FASTER than others?

    MACD is good if you want to predict what happened last week, heh, stochastics are nice, along with the ADX. But when it comes to a choppy or not-so-clear-cut market, what do you turn to?

    I am not asking for your 'edge', just a direction to go in. I know you can tweak the periods and such on indicators, so that you might get a crossover before everyone using default settings, but then you run the risk of a false signal. Then again, if pretty much any indicator reaches a key level, it can give anyone a false signal, unless the summation of everything you're looking at, makes you sway more to one side. Then there are the traders who make bets at levels BETWEEN the major psychological levels. "If we get to 46%, I think we'll hit the 50 line."

    I suppose no basic indicator is telling, and I am asking a stupid question. If BASIC indicators told anyone anything telling, everyone would be rich. Also, I do understand the psychology behind different levels. I understand where different traders look for entries and exits. Actually one problem I do have, is that I look at TOO much information it seems. I see resistance and support all over at times. We had a cross over here, but not here or here, maybe a few more ticks / points and we'll satisfy multiple indicators, and then bam, I've missed a move! It seems that if you wait for indicators to tell you anything substantial, you're already too late, more so on short-term trading.

    And look, I get the whole risk reward game. You find high prob. setups, let your winners run and cut your losses short. Trade with the market not against it. Use long strategies on long days, short on short days. Map out support and resistance levels, and use them to determine entry points and profit targets. Never risk more than a comfortable amount of your account. .5% - 2%. If your strategies begin to fail, find why they're failing and adjust them or find new strategies. Sentiment and news, more basic bs that a child can be taught. Set up a failsafe so that if something insane happens before your stops are in place, your software automatically kills the position. (if I got anything wrong there sorry, but that is how I'd sum up what I know of intraday trading equities, i would appreciate corrections if im wrong)

    In my mind, any moron can read candles and volume and make gambles at key levels. Any trader is going to be able to read a daily chart and make basic predictions on where prices can go.

    I suppose a lot of traders react to the market, that way you are not fighting it. I just have an internal desire to look ahead. Perhaps the best way to look ahead is to analyze what news is coming in the next week, and use technicals as the mechanism for price movement.....

    I suppose I've already answered my own question. Combine all indicators you trust into a custom one. ~ high prob. setup scanners.... i guess you let the machines do the work for you. machine presents you with signals, you make a decision, the end

    But again, I'd like to know if there are any recommendations on indicators for short-term trading when you are not in confirmed trends. .. (something you would throw on a 5 min chart)

    ALSO please tell me any faults you see in my general view of day trading. do I have it all wrong?

    p.s. while i have traded lightly over the past year, I am not an active trader, and I am not going to enter trades without clear objectives. please spare me the "save ur money and work at mcdonalds" rant hahahaha, i want to know as much as I can before I begin. I have worked with demo accounts, but I know trading real money is a different game, so I do not want to develop bad habits. I use demos more to become familiar with the software.

    thanks again ET
  2. Sorry to tell you, but you can not look ahead.
    Sorry to tell you, but all derived indicators have no value over price.
  3. ksmetana

    WOW, I hope you feel better airing that out !

    Seriously, sounds like you're pretty frustrated. Maybe its time to shake things up and take a different perspective. As the case with most suggestions given out on ET I'm sure mine will die with your thread but I'll try to throw something at you that might stick.

    Seems like your searching for an edge that you can plug into any equity or future contract and magically start making consistent profits and live happily ever after. It didn't work that way for me, but then I'm a egomaniac with an inferiority complex who always wants to be right, at any cost. I suggest you choose one (1) market and learn to trade it well. In my opinion most successful traders find a market that fits their personality and style (method) of trading and stick with it...... and stick with it.... and stick with it, before expanding into other markets, if ever. Corn trades differently than gold, gold trades differently than oil, oil trades differently than the S&P or the Dow or potash or apple. But if you want to learn them all at the same time no one is going to stop you. I just think your chance of finding an edge that works consistently in one market is easier and less frustrating. All markets have characteristics or nuances that are exploitable, that's where your edge will reveal its self.

    Time frame; I don't like being late, I don't like being in a hurry, just ask my wife. I also don't like sitting in a car for twenty hours when I can get there in a plane in two and a half hours. When you find your fit, you'll find your time frame.

    Time of day; If I'm not willing or able to be at my computer from 7:30am - 11:30am EST focusing on 3m bars why then would I waste my time trying to find an edge that consistently showed profits scalping the opening range?

    Comfort zone; If I'm not comfortable taking heat then maybe I need to focus on a method that gets me in a trade soon after a trend starts instead of one that predicts a trend.

    Are we shaking things up yet?

    How can I get more out of indicators on a day to day basis?

    Study them... understand what you're looking at.... know their strengths and weaknesses identify when they don't work!
    Indicators are what they are, some have been around a long time why? Some people believe they help them make better trades.

    What indicators are considered FASTER than others?

    Is this a trick question? Leading & lagging. How about all the indicators you refuse to look at, let alone study K/bands, B/bands, ergodic, market profile, time on price, RSI, MA, EMA, SMA, CIA, FBI, NAACP, I don't know what they are..... Iknow what MINE are.

    But when it comes to a choppy or not-so-clear-cut market, what do you turn to?

    Experience,, keep looking you'll either find it, or you'll do what most successful traders do, go back to bed.

    But again, I'd like to know if there are any recommendations on indicators for short-term trading when you are not in confirmed trends. .. (something you would throw on a 5 min chart)

    My experience with indicators has been, the shorter the time frame the less effective they are, furthermore volume plays an important role in the effectiveness of most all indicators.

    ALSO please tell me any faults you see in my general view of day trading. do I have it all wrong?

    Do I have it all wrong? I don't think so. Like I said earlier sounds like you're pretty frustrated. Maybe its time to shake things up and take a different perspective. You seem like a ship without a rudder, just floundering around with nothing but water on all horizons. Good luck

  4. hahaha, thank you very much for the reply.

    You are right about me (ship without rudder). Rather than actually sail somewhere, I tend to sit out at sea and observe the horizons until I'm left starving, and down to half a bottle of rum.

    I tend to look at EVERYTHING, just like you said. I also have that ego you described.

    I spend a lot of time thinking about all the possible ways fear and greed BUILD the technicals and patterns people use. It is absolutely fascinating. The market is built of perceptions of price, not prices themselves. Charts are the mathematical representation of how fear and greed react to economic data. I believe technicals are imperfect due to unexpected news (when the markets trend through days / weeks, news seems to trend as well), trader anticipation (traders built strategies that eventually become overcrowded and fail), and irrational trades. While random news and irrational trades can not be forseen, I think trader anticipation can be studied to improve visibility into future price action. However, it seems a lot of trading can be irrational. Often the entire market will move prices with no change in outlook. The only difference between yesterday and today, is that time has passed. Since we are trading against a perception supply and demand, rather than ACTUAL supply and demand, irrationality must be expected. In my vision, prices take time to settle to realistic levels.

    Look at what is going on right now. We had that huge bull market in late 09 that kept going and going. The flash crash told ME that we were incredibly overbought, to the point it caused an instant panic selloff. I don't believe it was a glitch, unless someone can show proof. Last I heard there is still no proven reason for it. If it was a natural occurrence, wouldn't that just so incredible? I now think the market has settled, and we are much closer an whatever the ACTUAL value of the market is. I personally feel it is somewhere within the current trading range, though it looks like we could break below soon, only because of worry / FEAR. Just because things are not improving quickly, they are getting worse? Everyone out there has different visions of what will come next. It is like a soap opera, everyone has their own methodoligies, risk tolerance, etc, no one is perfect, they are limited to chance.

    Anyway, I think you are right man. I should focus on a particular data set, and find what works within it. Why conquer the world when you can find paradise in a small corner of it..... ESPECIALLY at my level.

    Well I am going to be trading equities full-time soon. In using your advice, I will most likely find vehicles that are operating in trading conditions where I feel at home, coupled with market scanners for probability plays. Low volume until I find my niche.

    If I let the market work for me, rather than battle the market with my ego, hopefully, my rudderless ship won't capsize.

    I wouldn't mind conquering the world though.... get rid of feminism, get rid of the recession.....
  5. Redneck


    What I post is not meant to counter WF – its good stuff

    Mine is simply a different pov


    There have been several times I found myself heading down a dead-end or confusing path – with how I had my charts configured, and/ or the tools I was using

    Each time I would remove everything from my chart(s) – except price – and rebuild

    I would do this with the explicit goal of adding only what I deemed necessary to

    1.) Preserve capital
    2.) Make money

    Btw – this whole start, stop, start over, explicit goal routine – sounds quite simple and straight forward – now… Just realize it’s hindsight talking…. At the time it was anything but….


    Anyway what ever we place on our chart must what – give us the ability to identify a set up

    Okay so what exactly is a set – (and granted even though I have read some definitions… I am not sure I can precisely define set up… but what I can do is precisely describe a set up’s characteristic… and what it does)

    A set up characterized;

    Is very specific
    Provides a way to minimize risk
    Provides a point of entry
    Provides profit target(s)

    What a set up does;

    Identifies an entry point
    Identifies an exit point for a loss
    As you gain experience – Identifies an exit target(s) for profit

    In very specific terms - Specific meaning the criteria (specifically to enter, and or exit for a loss) does not change while you are trading/ or in a trade – any changes are made off trading hours only

    Specific also means clearly defined


    My suggestion

    Clear your chart(s) of everything but price – start over – use a minimum (of the multitude of tools I’m sure you have available) – and build a way to identify specific set up(s)

    If this is beyond your experience level – then you have more to learn… It is very doable

    Also whatever tool(s) you decide to use – be sure you can explain in minute detail how it/ they benefit(s) you in identifying a specific set up(s)

    For if you can’t explain it – by default it is useless

    One important note;

    More tools does not equate to more reliable set ups – the point of diminishing returns is soon reach as too much stuff on a chart leads to conflicting signals, cluttered thoughts, and indecisive actions

    We’re traders… not analyzers, prognosticators or procrastinators


    Aside anyone care to define the word set up as it pertains to trading – knock yourself out – personally I don’t care what it means – I only care that I can exploit it as a means to an end

    Shakin it up here boss… (think Cool Hand Luke)

    Food for thought…

  6. thank you, more good advice. you're right, masses of indicators do nothing but conflict to the naked eye. you have to find proper risk-reward setups you believe in and jump in with proper risk management.

    While I already understand how to use indicators to find setups, I look for too much confirmation. I need to narrow my focus and exploit what I see
  7. BNX


    A question to the OP:

    Have you looked at changing the parameters of your indicators? If you are looking at a 1minute or 5 minute chart the standard MACD 12,26,9 will not do you too well. Its better for daily or 60min charts.

    Indicators need to be changed to fit the time period you are looking at. A lot of traders fill their entire chart with every parameter out there looking for some "mix" that will do them correct. You can simplify very easily by using the right parameters on your indicators.

    my .02

    Good luck trading.