Technical Indicators for Newbies

Discussion in 'Technical Analysis' started by Richjohns12, Jan 21, 2009.

  1. Hello everyone, first post on the site :)

    I was wondering, since there are so many indicators to look at, I’m using a demo account to learn but I find myself overwhelmed with too many options, can you give us newbies an opinion on which indicators are easier to learn or use at the beginning?
  2. Welcome to ET. If you are going to use indicators, pick any one of them. Learn the math formula so that you know what you are looking at.

    Then, develop a risk management plan.

    Then, using whatever indicator you choose, trade on a simulator until you are comfortable.

    Then, get an account and trade very small amounts so that you don't blow up right away.

    I started with candlesticks.
  3. Exponential moving average.
  4. 10, 20 and 50 SMAs
  5. Pekelo


    But seriously....

    You don't need to know how the engine works to be able to drive a car.
  6. Illum


    Im new as well. Check out candlesticks. I change my chart to candle sticks and color up green, down red.

    Learn the patterns, and look for similar results from patterns.

    Checkout the SPX over a year or two period.

    Right now I am looking at a pattern right before October crash. One large bar down then two days after 9/29. I see a similar pattern last three days. Interesting.

    Im reading Elliot Wave too, I can see them in a candle chart, so when I learn more no change for me.
  7. You noticed something very important. Trust your feelings that something is wrong with indicators.

    Just think about it:
    If there would be some rule like "when EMA 20 crosses above EMA 50 at MACD>20 then Buy at market" it would certainly be discovered by someone pretty soon. These rules could be easily put into some mechanical code and used by machines. Therefore there would be no more edge in this.
    And: If some single indicator would be really helpful why should the software producers give it away for the public instead of using it on their own?

    There are complex patterns which are still too difficult to express in formulas but human eyes have a chance to detect them. Just as computers are pretty bad with speech recognition and many other stuff like that.

    Let me recommend to just look at charts, many many charts - with no indicators at all.
    Look at the times when market sentiment is changing, what do you see there?
    And get as much information as possible (volume, after hours, depth of market). Indicators are reducing information so that is the opposite of what you need.
  8. Trying to trade by indicators does not really work. All you will learn, is they will suck up your money and leave you poorer in the process. Neither does Elliot Wave, candlesticks, Fib or other such junk. They have been tested thoroughly and found basically useless, especially after factoring in trading costs.

    Try to learn how to trade price action. There are several threads bouncing around that are much more useful than the above.
  9. Not all indicators work at all times. Nor do all indicators work equally well for all stocks. I suggest focusing on one type of stock (small-cap, large-cap, Russell 2000, S&P 500, NASDAQ, Amex, biotech, retailers... take your pick) and see for yourself what indicators are working best for you.

    Based on the PDF linked here:

    Chaikin A/D Osc.
    DX (DMI)
    Ease Of Movement
    Fosback’s Unchanged Issues
    Hughes Breadth Idx.
    Lag.Line Weighted Mov.Avg.
    Lag.Value (LagR)
    Line Weighted Mov.Avg
    Line Weighted Mov.Avg.Diff.
    McClellan Osc.
    McClellan Summ. Idx.
    Volatility (Variance)

    Note! These "best" indicators were not measured for the U.S. markets. Also these are listed alphabetically, not in order of measured usefulness.
  10. Thanks a lot for the info, took me a while to get the idea behind it, I may have overlooked letting you know that I'm focused on forex for the time being, since it seems a simpler way to start and a few other advantages it has for me. Sorry for not telling you since the beginning, if the thread should be relocated, I'd thank and admin to do that

    I do have a question now that I made that clear :).
    Indicators seem to be very important in forex, and that is pretty much what led me to make this question, aren't they one of the main thing to take into account?
    #10     Jan 23, 2009