If you were to start today building a system to daytrade the ES - let's say, you wanted to trade 5-minute bars, make between 5-10 trades per day, just to get the discussion started - how many indicators would you need to use? In your opinion, do the best systems use 1, 2, or 3 indicators...more than that?
Not a one. I don't have a single thing up except price and volume, and the volume is pretty useless too. The last 4 days I've traded the es I'm averaging 17 pts a day just using good old TA and market timing.
The best systems use whatever enables the trader to make the most of his day. There is no "right" answer that will apply to everyone. Personally, I use one: a MACD. --Db
I think another important question would be what time period / tick charts are used with what ever indicators and what settings with the indicators. Like... 3 minute charts and MACD at 7-28-7 or 210 Tick chart and MACD of 12-26-9. Just my 2 cents. Good Luck. ~EC PS Personally I keep a close eye on s/r and pivots.
My advice is to focus less on indicators, and focus heavily on profit/loss ratios and position sizing (If you plan to trade more than one contract at a time). You'll be good to get a better than 60/40 win/loss regardless of what indicator(s) you use. You'll make your money with solid money management.
Thanks - not looking for a "one size fits all" answer, just a general framework to start with. So far I like what I hear! Please, keep the input coming, it's very helpful.
Thank you very much for the feedback. I will definitely factor those in. EC - If you can PM me some parameters for looking at pivot points, that would be great. Hybrid - Regarding money management, can you recommend any great books on the subject? I've skimmed some of Ralph Vince's stuff and also read Ryan Jones' "Trading Game."
hybrid, in my humble opinion you're a quite a bit off here. You wanna get a nice positive expectation thru the appropriate Win % and W/L ratio. Now it's easy to say just make sure your wins are twice as large as your losses. Sure anyone can do that. Just make your target 2x your stop. But then a funny thing happens.. your Win % goes down to like 20%.. and you're no longer a happy man. Anyhow my point is that the objective is an edge (positive expectation resulting from Win %, W/L ratio combination). You coming on here and saying "well just achieve this Win % and that W/L and you'll be OK", is like saying "When running your business just make sure your profits exceed your losses". Getting an edge is hard. And the relevant question is HOW to get it. What method(s) will give the Win % and W/L you mentioned? That's the question. And by the way, many people confuse trade management (which influences your avg W/L and Win %) with Money Management which is basically bet(position) sizing. The topic brought up by hybrid relates to trade management rather than MM described by Tharp, Jones, etc.
each trader is different. I guess, what surprises starting traders is that the more you do this, the less you use indicators. and even those still using many indicators in a discretionnary way, are in fact filtering most of what they see with their brain. you should get many very different answers (unless no indicator is present on the chart). because those using indicators use them only as a reminder of what to do, not really as a strict system. if you are a strategy trader, with software generated suggestions, that's another story. but I don't think your question is to this type of trading. tntneo