when price is moving in a range it is usually very obvious where price will reverse, all stochastics are telling you is that hte buying pressure is greater than that of the previous few bars, how do we know this buying pressure isn't the start of an uptrend?in other words stochastics , you don't really need them. my advice is to read the tape around as many levels as you can find, you could make a decent 40 trades a day tape reading off of fibo,calculated pivots, trendlines, value areas (market profile), support/resistance
there is really only one answer. you can get a boatload of responses and opinions from anonymous ET 'traders' you never met But anything that works, ought to be able to be put into a spreadsheet from hundreds or more traders, over many instruments, for a long period of time and significantly outperform "random.". Otherwise, none of indicators, S&R, TA, "self-fulfilling" or anything else will have any value to YOU.
It greatly depends on you, market conditions, time frame, trend age, instrument and mental focus. Sometimes confirmation of multiple techniques, other times naked price bars. Indicators and oscillators have their place at times but they over load and FAIL, (read fail not embed) in certain conditions/phases. My favorite (ES) is a simple 4/15/60* minute bar chart (square scaled), with a few angles and a circle or square. *My times vary with the instrument.
there is a right way to use indicators. you guys must realize that indicators don't predict something will happen, but that it is a logical consequence of what price does. For example, If you get a doji or reversal bar, it does not mean the market has a 80% chance of turning at that point. It means that when the market turns, there's an 80% chance of a doji or reversal bar forming. Positive divergence does not cause price to rise. However when price does bottom out, positive divergence appears in 80% of the time. These percentages are not the real ones obviously, but merely an illustration of how you should think. You need to think the other way around when using indicators.
There is great truth and much wisdom in what you say. When price turns you can look back a few bars and see a positive divergence or a doji and this is of great importance to any true ETer. It is important because it confirms what you can already see with your own eyes. Namely the price has turned. You have really let the cat out of the bag this time ct3. The next step you take with this priceless information is the key to successful trading. I am almost reluctant to mention it. jjf
When you have an environment of confluent signals at the moment the doji is left behind at the bottom of a move, there is a high probability that price will rise. Combined with the fact that many traders will be watching for this setup to occur in an environment of confirmation, the chance that price will rise enough to lock in profit sufficient to cover commissions and slippage is nearly a given. Your patience in waiting for the highest probability setups will be rewarded by a high win percentage and low risk stop loss zones. Intraday, if XYZ left a doji at the bottom of a 3rd leg down, XYZ is extremely oversold on its daily chart, and the market is currently extremely oversold, the chance that XYZ will rise enough to take a quick decent profit is high. If you wait until XYZ rises a bit, returns to test the low of the 3rd leg doji and buyers come in with volume above or at the pivot low, the chance of XYZ making a strong move to the upside is extremely high.
Indicators get a bad rap because a lot of new traders turn to them in hopes that it will hold their hand to profits. stochastics are terrible when used alone, I like to look at rsi too just to have a second opinion as its not as choppy as stochs are. like other posters said, it works until it doesn't. But this is true regardless of if you trade indicators or not. if your system is heavy on indicators, like any system, the rules need to be followed consistantly. because it will fail from time to time. get USED TO IT. Anyone who says that there are no traders that make money from indicators is a f---ing dumb ass. What a amature thing to say. Moving averages are great, but like all they have their downside. Ma's can be used for much more than just crossovers...which imo suck anyway. In fact im developing a system that i hope to paper trade real soon thats all 99% MA based. I will say that indicators make your trading more complex and confusing, and unless you have defined rules in place, you wont make a dime regardless of what indicators you use. CM