Many traders believe that to be a successful trader you need mountains of indicators that give you some kind of "edge" over the market. I am here to say that trading as a means of consistent income does not have to be painful or difficult. That less is certainly more when it comes to trading. Ive met traders with every indicator under the sun on their charts, with years of training under their belts having spent thousands of $$$'s and STILL not making a consistent income.... Why? Because Indicators are liars! Sure sometimes you might pull of a trade or 2 but in the end you always get spanked....Why? Because not everyone uses a MACD with your settings, not everyone uses a Stochastics or an RSI. I believe to be an effective trader you have to look at what the majority of traders look at...So what do most traders look at? Support and Resistance! Almost every system out there uses Support and Resistance to some extent. Support and Resistance is our number 1 indicator. So why not make Support and Resistance your system?! Mark up some levels on a chart using time frames from 1hr and above (this is what the big boys who move the market watch, so no lower please) and see what happens! Use other info that the majority of traders watch ONLY as confluence, Market Profile levels, Pivots and Fibs. In the attached file is my daily worksheet, I will start posting this on the forum regularly as long as others find it of value. The levels described in the attachment are considered high probability areas for market "reversal", offering retracements of 0.75 points to in some cases 50+ points. In many instances historically referenced Support and Resistance levels can help traders catch markets tops/ bottoms to the very tick! Why? Because Support and Resistance levels are the most widely used trading tool! Everyone from Hedge funds and banks to the small time trader at home use Support and Resistance levels It might be difficult to leave the system you are using now so why not use these levels as a guide alongside set ups defined by the system/strategy that you are implementing. All levels described have historical significance and thus considered high probability numbers. The numbers described are in a fairly large range to take account of market volatility. Throughout the trading day these numbers can become areas of Support AND Resistance. Good trading all.
There are many threads on ET about this topic and I find nothing new in yours. Good of you to think about those who are hooked on indicators, however. I'm curious to know how you know what the so-called big boys are looking at. Are you one of them?
The market has been consolidated for quite a while now. During consolidation S and R works better than ever. When uptrending S holds more so than R. When downtrending R holds more than S. It's just a matter of continuously adapting to the big picture looking out for fakes and reacting to changes in the trend. I agree about indicators, they should be illegal. Anek
Those numbers are fine and dandy, but how to trade them is what's important. Are you going for 3 ticks or 200 ticks on a trade? What size stop are you using? Are you scaling-out, scaling-in, or all-out/all-in. Trade management is much more important than entry levels.
Not really much new you can say about Support and Resistance it is what it is I guess. What I would like to do in this thread is confront the compulsion newer traders have for the excessive use of indicators. Indicators are the Devil. With regards to the "big boys" some of the guys in my trading circle of friends have worked for banks and hedge funds, trading fx mainly. The basis of my thinking is derived from what I have picked up from their experiences. I day trade the ES, I use S/R levels derived from a 4hr and 1hr (no lower) chart mark up my levels and then watch the market as it approaches those levels. Then watch price action in that area and place my trade based upon how price reacts in that area. I have couple of other things I look at but this is the mainstay of my method. I guess I wanted this thread to be about my aversion to the over use of indicators and to shed light upon how simple trading can be. Thank you for your comments
I recommend using zero indicators except during simple week to week swing trading where stochastics are useful. Volume is needed only to make sure the stocks you are looking at have enough liquidity. The more indicators you use the more lost you are. For example looking at moving average is entirely stupid. All you have to do is see that the price is moving up or down. Support and resistance is also a dumb indicator because all you have to do is study the past price movements. The only problem is that no one understands how to study price movements and how to take advantage of the history of certain characteristics within price movements. Pitiful.
Hi Sandy Firstly i totally agree trade management is much more important, I like to be a perfectionist in both. In answer to your question. I split my contracts into 1/3s. I have targets of 3 ticks and 5 ticks on the first 2/3s and the last 1/3 is a runner. My stop is usually 5 ticks from entry and as soon as price moves 3 ticks my way i move my stop to 3 ticks from entry. At this point I should hopefully have 1/3 filled at 3 ticks. The next 1/3 should hopefully be filled at 5 ticks The 1/3 filled at 5 ticks is my guaranteed profit in the trade. The Runner exit is discretionary. It is allowed 3 ticks of space from entry before I am taken out BE on the runner(because of the initial 3tick exit). In many instances price retests a level so i like to give my trade room to breathe (only a little room mind). I like to target around 3-5 points on the runner thus keeping my risk to reward at around 1:2. So i only need to be right 50% of the time to take home a nice income. I am very risk averse, I have toyed with all in all out but have found that this defensive management helps to keep my risk small. Many traders talk about "letting your profits run" I find that very vague and concentrate on just making a profit in any given trade that is larger than any potential loss I could have had in that trade, instead of trying to hit 50 point home runs. I hope this makes some sense. If not I can elaborate further
I agree if you can trade S/R with some price and volume you can do very well. If the market breaks one of your confluence areas on volume closes and pulls back on low volume prob. a good one. It will be interesting for others to compare their S/R to your areas. The biggest challenge I have found using S/R confluence is when the S/R is spread apart by a couple of points up and down the chart. I have found making those into no trade areas can be helpful.
At the support and resistance zones...watch the Time & Sales for an indication of No Supply or No Demand. The MMs will try to mark the price down or up several times, and if there are no takers...that's a potential pivot.