Are indicators overated?

Discussion in 'Trading' started by mounafia, Aug 15, 2009.

  1. mounafia


    I read more and more Et members saying that they use just support and resistance to be successful...and that moving average, Macd, stoch, etc (indicators in general)...are for losers.

    I myself trade the Eur/usd and I have the feeling if I was using only resistance and support, I would be dead right now.
    That is why I also use a mix of Moving average and Bollinger band (with support and resistance).

    But all this talk got me people really just use support and resistance to do their trading (and are succesful that way)...or is it just internet tough guy talk?

    Especially for the daytrading it seems to me this strategy could not work in the Eur/usd (you just have to look at the chart to realise it)...but I may be wrong.

    Thanks in advance (and sorry for my english).
  2. if u just use support and resistance ur % winners will be lower but youll have more trades
  3. Redneck



    I am a dumbass trader, not so much and internet bully – as it doesn’t make me money....

    So what I am about to say – is as straight up as I can be

    Do indicators work – yes – right up till they don’t....

    But I guarantee someone in the world is making money with them

    S&R works to – until it doesn’t (ever seen price – bust through one or the other – like a hot knife through butter)

    And I guarantee someone in the world is making money with it

    The only thing that never lies is price

    Now granted sometimes price is used to “fake’ the less battle hardened – but it never lies
    (btw – even the more experienced traders get faked at times which is why we quickly exit losers and never look back)

    It does not matter what you use – or do not use – to trade – as long as it is makes YOU money

    The “most” important thing is –

    You find a way to trade that matches you – that you completely understand its strengths and weaknesses (just as you must understand your own) – that you “can” make money with…. PERIOD

    There as many was to trade as there are traders – find what works for you Sir

    Just remember – price never lies, but it does try to fake us out quite often – and everything else works – till it doesn’t

    Focus on being the best trader you can be because.....

    No one can give you the "best" way to trade for you - We are all different - as such we must each find what works "best" for us

    Successful Journey Sir

  4. Lucrum



    Sound wisdom indeed.
  5. NoDoji


    As Red said, indicators work right up until they don't.

    If you see certain patterns work again and again, it's because the crowd responds to price at those levels in a consistent way. If everyone seemed to find value buying XYZ @ 60.00 and it moved up strongly from that price last time and now it's pulled back close to that price but not quite as low and the stochastics tell you it's oversold, and the moving average has been rising and it's near the lower Keltner channel line and overall market is stable or rising, then a lot of people should be buying that level for the next thrust upward.

    When a stock is uptrending and pulls back to the 20-period rising moving average, buyers who want to get on the train or holders who want to add to their winning position find value at that level and drive price to the previous short term resistance level (the last peak). If enough buyers still find value there (and enough nervous top-picking shorts have stops just above there), price will break through and the trend will continue. The further away in time a resistance level is that's to be tested next, the greater the chance it will fail the first test, because longer term holders from that level are anxiously hoping to get out at break even or thereabouts.

    It's when a level fails that the move can be very powerful. That's why double tops, double bottoms, and lower highs/higher lows usually lead to strong reversals.

    So indicators indeed are valuable to measure what's happened most consistently in the past.

    And well-placed stops protect you from those surprise moves.
  6. I agree with RN.

    However, if I may add a personal observation, indicators derived from price are approximations of price. Why deal with mere approximations of price when you have price? Price-based indicators may seem like in-depth analysis, but to me they are just shortcut views of the underlying. Think of coffee. Indicators are somewhat akin to instant coffee, whereas an understanding of actual price action based on extensive study closer resembles a well-brewed cup. So, as I see it, the trade-off is one of convenience versus quality.
  7. maxpi


    I'm sort of math oriented and programming oriented.. nerdy maybe.. I've invented a lot of indicators but currently I can get by with an SMA and Bollinger bands and a momentum indicator that I like.. I'm using only stuff that's been around for more than 25 years really.. nothing newer is needed....

    Personally, I looked at S/R as calculated by the previous days bar and found virtually no correlation to anything that I wanted to do, ever... I did find that Market Profile is a little better in that regard and Volume by Price can be useful in the first hour before a Market Profile is built up but neither of those is magic really, they just give me a head's up when a trend might slow down and I can see that anyhow.. they are security blankets maybe... I'll go back and see if the usual S/R lines help what I'm doing currently, things change and the usefulness of things sometimes isn't immediately obvious..
  8. since price movement is irregular, there'll always be times when an indicator or
    anything else fails, doesn't work

    one method to overcome this is using a search or scan via the charting program
    looking for instruments that meet the requirements of the trading system such
    as the 30 MA has just crossed the 20 MA, and only trade that/those instruments
    until the MAs re-cross, then re-search

    only a trading a single vehicle one's likely to have more 'failures' illustrating the
    problem of always being in the market rather than remaining out when in doubt -
    discretion being the better part of trading valour

    since my discretionary trading 'system' is based on Elliott Wave i'm always
    projecting price targets and turns and use fibo tools to do so, together with
    trying to EW the price formation - no easy task - the price movement is irregular

    my 'system' means i'm the indicator
    there's times i fail - don't work but do work well enough overall to be profitable -
    the name of the game

    an indicator i like: G#MACD
  9. TGpop


    tthe only people using support and resistance only are either very good tape readers,exceptional, or impatient college kids.

    im a tape reader, i trade the tape around support and resistance, trendlines, of course i use market profile and pivot levels for support and resistance etc.

    o yeh, retail indicators are SHI.T

    moving averages are good, bollinger bands are okay aswell, but stochastics,MACD? lol what a joke
  10. NoDoji


    Stochastics are an ATM machine when price is moving within a range.

    I've no idea what MACD is good for.
    #10     Aug 15, 2009