As we all know technical indicators are all setting dependent.. RSI , CCI, MA signal, all depend on arbitary settings given by individual traders.. Should we be trusting them in making a decision or what ? Is not it better to just look at the price action and the volume in real time and forget about all these indicators ? .. I know there are many excellent traders on this BB so your views are appreciated.. iraj
iraj...yes, ideally it is best to have your focus on price action. however, many of us mortals cannot mathematically calculate, in real-time, certain price support/resistance and divergence. i would recommend that you find some simple indicators for range (bbands, et al.) and trend strength (ma's, macd, et al.) and watch the market. after a while you will start to see exactly what price is doing, or rather what it should be doing. then find a way to capitalize on the inefficiencies. and watch out for those whole #'s! they are like black holes and will temporarily suck in price when it should be going the other direction.
Indicators ARE price action and/or volume. They don't exist independent of those two variables. They didn't appear from outer space.
I use both... >>> Price action only with volume (no indicators although some traders consider volume to be an indicator) >>> Setups based on indicators I really don't see one having an advantage over the other. Some will say that indicators lag the markets... so do price action only methodology because you still need to wait for a confirmation signal... that confirmation signal will cause a lag. Here's something else to think about... It doesn't matter what the indicator is, what the setting is... if it doesn't help you to be profitabe... don't use it. If it helps you to be profitable...I don't care if your getting your trade signals from your daily horoscope... keep using it because no matter what you use... you yourself are the deciding factor about your success or none success... not any trade setup methodology NihabaAshi
Try using the DAILY PIVOT and R1, R2, R3 ( resistance ) and S1, S2, S3 ( support ) levels on the S&P. They work better than one might tend to initially believe.
probably what you need is to find an effective way to test and validate whatever (indicators or else) you learn from any books or sayings. just a thought.
iraj...... Read this afternoon's chat log with Rich Kenny. One of the most important things he points out is near the first part of the chat: "The beauty of technical analysis is that all of the indicators I have mentioned work some of the time----and none work all of the time." To answer your question, YES technical indicators are good, but as electron points out, "They are only as good as the trader who uses them." BSAM
I've often wondered if there is a way to mathematically calculate the ideal period for an indicator based on how long you want to hold a position, on average. It can be done thru trial and error with backtesting, but I think it would be neat if there were some scientific theory to support a relation between a particular indicator period and a given trade time frame.
I think you could achieve this in backtesting by placing a simple condition in front of all of your strategy exits. For example if you were trading on 10 minute bars, and your target timeframe was 3 hour trades, each exit would only be triggered if bars since entry was > 18. Then if you optimize for the entry indicator length, your result will be optimal for the given timeframe constraint.