I find many of the conventional indicators (most are MA based) useless for intraday trading. But there are some which are really working. I would like to share my ideas. What are your experiences / Have you found something useful?
I have never found any indicator to be useful for intraday trading. I have tried everything, from Stochastics to 3 Line break and seems everything is a marketing gimmick. Moving averages are for guidance only and works 50% of the time which is similar to a coin flip. I am in the process of trying point and figure charting, since it filters a lot of noise and lets you see the patterns, but I am not expecting much from it. I really dont know how a daytrader can profit in a market that so deceptive as this one. Some traders say they can "feel" a stock going in a determined direction, but talking about feelings is like believing in a religion. It cannot be tested. I am starting to believe that daytrading is a phenomenon created by brokers to profit from us in commissions. I think that they pay some traders in order to advertise huge profits in order to lure other wanna-be traders into this losing game. So I think there is no opportunity in daytrading to profit. I recently went to Las Vegas and saw huge similarities between casinos and brokers. The trip to Las Vegas taught me a lot about rigged games and probabilities. At least, in a casino you can readily calculate probabilities on Video Poker machines and Slot machines based on their pay tables, but in the stock market you cannot know the probabilites or pay offs so easily. hsanson
Hsanson Your post got my attention heavily and I'll address it. The majority of traders aren't profitable that is correct. There are a few who are and they are constantly profitable. That isn't luck it's skill. Actually you can backtest any system and indicator to figure out your expectancy. Read Trade Your Way to Financial Freedom for more info (check out the reviews here if you think this is some sort of promotion) It isn't the indicator that is important. What is important is the size of your position, your stop, and the money management. I'm going to be doing a seminar for Daytraders USA on June 9th. It will be broadcast a few weeks later on the web. I suggest you hear about what I'm going to talk about. I will be playing a game with the traders who attend. We will be pulling marbles out of a bag. Each marble will represent real trades I've done in the past year. My system has a nice positive expectancy. The only thing the traders can control in this game is their position sizing. The trades will be random just like any market can randomly go against you. Some of the trders in the room will come out heavily ahead, while others will lose money, but they all had the same trades. The amount they risked made the difference. rtharp
I hold the opposite point of view concerning using technical analysis intraday. Intelligent use of T/A allows one to put the "odds" as they were, in your favor. I have used that same few indicators for years now, and have went as far as to calculate some of them by hand for extended periods. I feel that because of this, I know what they will be forecasting during the next few bars. Whatever techniques you are using, ensure they react the same way across all time frames. Also use the same inputs for every time frame, this can allow you to see the same "pattern's" across all time frames and anticipate the forecast. In addition the underlying market dynamics should support your decisions. There are probably a million different ways to do this, I hope this helps. -Hoyler
Rtharp: I read both books written by your father and they are the best ones I have ever read about trading. I also use a sector daytrading approach on NYSE stocks, trading only 100 shares with Interactivebroker's 0.01$ commissions. I have been trading this system with real money for 3 months and since I started trading it, it has been slightly positive. But I consider 3 months to be too little time to verify a robust system. I really dont know if this style of trading is negative expectancy in the long term or not, because it is so subjective and discretionary that it cannot be backtested. So as far as position sizing is related, I am practicing with the smallest share size I can get on the NYSE without going into odd lots. I must admit that I can be profitable trading with as little as 100 shares because my commissions is low compared to other brokers, so 0.02$ of profit on 100 shares and I am immediately breakeven. As I said before, I am a big fan of your father's books. I will really appreciate if he writes a book on trading systems design (go tell him) And his books took me several readings to understand (traits of a good book). But what I don't understand about the markets it that you CAN'T readily calculate probabilities as in a casino game. Market/stock/futures variables are too complex and there is no rule that says you can win 70% of the time in any market. In contrast, casino games such as roulette, craps, blackjack, video poker, you can readily know your probabilities with some number crunching and immediately adjust your position size accordingly (of course most of those games are negative expectancy games in the long term). You can even derivate some optimal playing strategies for these games, since it is a "closed" game. By closed game I mean a game that you can calculate its probabilities and expectancies and be sure it will continue that way as long as it is not rigged. That is why some people say backtesting is useless and only represents past historical testings that may or may not continue. You mentioned about your positive expectancy system. Is it complex ? ? Have you backtested it ? Did you develop it or you borrowed it from someone else. My sector daytrading approach was borrowed and I modified it a bit to fit me, but I am still unsure if it is a positive expectancy system because I have no way to backtest it. Another problem I may have is that since I trade at home alone, I dont have other traders to share ideas with. hsanson
Well first on a systems book there is a full course on systems. A seminar and a tape set see this link. http://www.iitm.com/systapes/ii02000.htm I'm not here to sell tapes or whatever though. I believe by helping others in a spiritual way it comes back to you so that is more of my mission here. On indicators some work some of the time others don't. I have friends who have tested everyone there is on Supercomputers and most come out pretty random. I can make money with a random system. It means trailing wide stops in the market, low transaction cost, and position sizing that I afford to have a few big losing streaks. All of the systems I've used are being used by others successfully. Why test the waters when others have done so and done quite well. If you have a positive expectancy which you do if you are profitable what can you do to tweak that ratio. Traders I work with constantly test what they have. What if is a magic question. What if my stop was .05 higher on aver and test it what if it was .05 lower. what if I use this filter to the market? What if I use this filter? This is serious work but it can be used to your advantage to become profitable. Email me and I might be able to give you a few ideas. It's probably better to take this off the board rtharp
"I can make money with a random system." I remember reading this same thing in your father's book. This never made sense to me. If the market (or a system for trading the market) is random, how can you have a positive expectancy?
I like to see volume swelling as part of a buy/sell signal. I don't know what the professionals here think of it and I haven't seen it in any of the 30 or so books I've bought but I notice a stock dropping fast on increasing volume.. down... down... down... then it levels off the trades slow down and tick up and down then volume picks up... maybe it wiggles around a bit then they start hitting the offer and the bid starts lifting. It moves up for a while and then volume picks up and the pace slows and the price drops again. Full cycle 360 degrees. I know this isn't very scientific...and I haven't quantified it with % moves agains % volume change etc but it's just the way I see things happen a lot of the time. I also notice that this works more reliably with stochastics at oversold and overbought levels. I think the quick interday trades are almost an art at times. I guess all I'm suggesting is include volume somewhere in your decisions. Good luck!
if you want to trade intraday forget about indicators, just follow price / volume, all indicators are derivatives of price etc and as such lag and are much too slow... no professional making money i have ever heard of trades intraday using indicators... unless they don't / can't trade and instead want to sell you a "holy grail"... don't make the mistake of thinking that all the pretty pictures you see of bank trading rooms etc with lot's of activity have anything to do with "daytrading"... market making has absolutely nothing to do with that... cheers
vvv, I am not sure if it is true. I know at least one trader trading consistently using certain indicators. He is not making millions but 15-20k/month. I also use indicators for confirmations and support/resistance. I guess we all are different. PKJR