I'm fairly new to Technical Analysis and I haven't been able to find many indicators that yet alone function for intraday. Currently I'm been looking at Bollinger Bands and Stochastic. Can someone suggest a book to read, or point me in the right direction?
I've been intraday trading since 1999 and bollinger bands and the stochastic has never worked for me. My advice would be to find an intraday strategy that has a high statistical edge of at least 80%. Then use a technical indicator and a time interval that will work best with that strategy. Good luck.
Neither of which will tell you anything you shouldn't be able to glean from a "naked" chart. http://www.dacharts.com/articles/Buffy_on_price_action.php http://www.dacharts.com/articles.php
Price support (S), price resistance (R) and the ability to draw trend/channel lines off S/R levels are all you need. Any naked chart (candlestick, OHLC, line) provides you with this. Trading in the direction of a trend is where the easy money resides. Although with-trend signals fail, the level at which failure is signaled is obvious and allows for small losses, while the reasonable profit targets on a with-trend push are significantly larger than the stop loss. In a trend, price will be supported or resisted at the trend line in your time frame more often than not. "More often than not" means there is a statistical probability in your favor. For guidance and confluence, you can place a mobile S/R level on your chart (the 20-period moving average is most commonly referenced by day traders and short term swing traders). The 20-period moving average is a level where trend-followers look to enter a position or add to an existing winning position. It's also the level at which trend reversals often become confirmed. "Confirmed" means once price closes on the opposite side of a 20-period moving average following a strong trending move, price will - more often than not - continue moving in the new direction, especially if a trend line is broken as well. A statistical probability in your favor means "more often than not". This doesn't mean "always". That is why a protective stop takes you out of trades where "not" occurs, and preserves your capital for the next appearance of the edge (with-trend setup). Your goal is to capture significant profits on "more often" with-trend price swings and to limit losses when the "not" occurs. A with-trend pullback in a larger time frame (such as a daily chart) that finds price support or price resistance at a trend line or 20-period moving average in that larger time frame, often signals a potential trend day for intraday traders. Since all trends in all time frames reverse, study charts in your time frame and in larger time frames to learn to recognize common reversal signals. A reversal signal in a larger time frame (such as on a daily chart) often signals a potential trend day for intraday traders. The biggest danger of using indicators is bias. If you use stochs, Keltners, or BBs you may believe in the indicator so strongly that you hold onto a losing position instead of reaping profits from a strong trending move. Price can remain overbought/oversold for a long time in a strong trend. Price always reverts to a moving average, but the moving average is a moving average and the level it reaches at the point price finally reverts to it may be very far from where it was when you initially put on a counter-trend trade expecting a "timely" reversion. Inexperienced traders gravitate toward indicators because indicators provide a sense of security (overbought means price will have to come back down; oversold means price will have to go back up, and so on). The problem is that it can work really well until it doesn't. Experienced counter-trend traders have large accounts and solid risk management rules. Even the best of them blow out when bias takes over. I offer you the advice that many offered me when I was an indicator-based counter-trend trader: Ditch the indicators. Just trade price. I had no idea for the longest time what that meant. This post explains what it means. Good luck!
NoDoji, I'm sorry I did not follow your many many posts. What instruments do you trade currently? equities/futures/options/oil/gold/silver/forex? i enjoyed your last post.
No Doji, This is all beautiful in a perfect world, but in the real world price chops a whole lot more than it trends. You know how many closes above or below the 20 EMA one gets in the 5min chart that mean absolutely nothing ?
Thanks! I swing trade equities in some retirement accounts and I day trade mostly oil futures and some ES. I occasionally watch silver for amusement purposes only; I would never try it at home. I posted on the BAR BY BAR thread recently something regarding this: "The environment surrounding a setup is as important as the price bar or multi-bar pattern itself." During range/chop, you can sit on the sidelines until a trend or breakout sets up, or you can learn to trade a range. A moving average flattens during range/chop, meaning price will close below and above it perhaps multiple times until clarity and direction appear. In a well-defined uptrend, however, price will rarely close below the 20-period MA for more than one price bar. Look at oil futures today (CL) once price closed above the 20-bar MA on the 5-min chart. Price continued to trend up through five pushes and close above the 20 MA for over two hours before a shooting star at an extreme (new high) signaled a possible reversal or a consolidation range. What I posted here on this thread was: Your goal is to capture significant profits on "more often" with-trend price swings and to limit losses when the "not" occurs. In a perfect world all trades would be winners. There's an overwhelming belief that emerges on ET that says TA is crap, price action trading is crap, trading is totally random, you can't win, blah, blah, blah, simply because higher probability setups are not fool-proof. I worked with a trader last year who kept asking me at the end of my trades how I knew price was going to do "X". I would explain that I didn't know, that I never know where price will go on a trade, only that more often than not when a particular pattern appears, price move "X" follows. Because of the time and effort I put into developing my trading plan, a majority of my trades would go to the price target I expected. So he thought I somehow knew price was going to do that, even though at the time I put on the trade, the chart looked a bit "iffy" at the hard right edge. He thought there was some signal in the setup that ensured success, but there is no certainty in trading. You look for odds in your favor (trends attract more players in the direction of the trend), and you implement a risk:reward ratio that allows you to profit from the "edge". Here is my entire post from the BAR BY BAR thread: