I have only traded forex and never got into stocks. I have been doing it for about 14 months.Still learning and trying everything out. After all this time of testing lagging indicators like rsi stochastic macd I still cant figure out the use for them. Yet all these books and courses stand by them. I use sar trendline fibs and pitchfork for my technical analysis.I look and see macd or rsi and its heading down and it hits a trendline and it goes right up. Do these lagging indicators work better in stocks or futures? I am thinking of giving up on figuring thier use?
When I started out a few years ago, I read those same types of books swearing by stochastics, RSI, MACD, etc. I tested them both as systems on their own and with different kinds of filters and came to the conclusion that they are worthless (for the most part). In my opinion, all you need to trade is a ruler and daily, 60 min, and 10 min bar charts. Things like bollinger bands and moving averages are useful. The only indicator I use anymore is the ATR, and that's only to determine mechanical stop/entry points. Good luck and happy trading
I agree with the poster above. Indicators, for the most part, are worthless. I certainly won't enter a trade based upon them. The words "overbought" and "oversold" are pure nonsense - the only way to know if a market is overbought is if buyers fizzle out at current price levels and no indicator can show this. My exclusive use for indicators is to determine momentum. Sometimes it helps to see when current moves are stalling to determine a good exit strategy. I truly believe the only way to remain a winning trader is to learn to trade by sight. "Know thy market". Learn how to use volume and price action to determine accumulation and distribution patterns. Know the difference between genuine price moves and stop running. In other words, learn to think like the 10% of the traders who win and not the 90% of them who lose. I find candesticks to give important clues as to what is happening in the market, also point and figure charts. It takes a lot of work and patience. You need to become a student of the markets. Don't listen to the claims that you only have to look at charts 10 minutes a day to be a winning trader. It is a job and hard work pays off handsomely. Once you gain control of your emotions, you are halfway there. It took me 10 years of losing before I laid the groundwork for a winning mentality. You will throw away all those indicators and concentrate on the things that really matter in trading. Good luck.
I personally don't like to clutter up my price charts with all of those antiquated lagging indicators and oscillators. All of them I'm aware of are just a moving average of some sort of what has already happened and in no way indicate what is going to happen. In some cases they may have some limited use, especially if the trader is aware of their limitations. Most people I notice trying to use them are not. As for FX, personally I've have found them to be even less useful with FX than with other markets, but that's just my opinion.
ATR = average( max( high-low, absolute value(close of yesterday - high), absolute vaue(close of yesterday - low)), number of days) Measures average volatility over specified time. Personally, I think TA works well with most timeframes. I don't think the traditional lagged indicators work well with any timeframe. For instance, 60 min S/R areas are important on daily charts and vice versa. And the traditional indicators are just as subjective as the traditional TA; some people sell at an "overbought" stochastics level, others buy (Bernstein Stoch Pop). I think of TA as a roadmap; to me, these indicators are just the signs along the road that confirm you're on the right freeway. My roadmap tells me where to get on and off a lot earlier than the signs do.