The best and worst indicators

Discussion in 'Technical Analysis' started by Grantx, Sep 14, 2017.

  1. Grantx

    Grantx

    As you know by now I dont use indicators but I have tried a few. Im interested to know what your favourite indicators are and which ones you think are a total waste of time. This doesnt need to turn into an argument on whether indicators work or not, Im just interested in your opinion and reasons for using a particular tool. If you have an opinion then Id love to hear it because I am always ready learn something new from more experienced traders. The only rule is that for every negative opinion, you must have something positive to say about something else.

    Here is my list starting with the worst ones.


    Top 3 worst indicators:
    3:
    MACD: Convergence divergence something or other.
    Usage: Apparently good for trends but sucks balls in a range.
    Comment: Totally useless when the market ranges which is a lot of the time.


    2:
    Swing indicators: Draws a straight line joining swing high and low points.
    Usage: Helps you identify ranges and trends by highlighting swing points
    Comment: Im am going to be the ultimate lazy retard and get something to draw a line peak to trough because I can’t be bothered to simply look for myself.


    1:
    Bollinger bands: A moving average with standard deviation bands.
    Usage: Scalping channel breakouts and contracting/expanding channels indicating price volatility.
    Comments: This pulsating intestinal tube goes against every common sense rule I can think of. By the time price breaks out of a channel it is already too late to enter the trade. Just as useless as a moving average.



    Top 3 best indicators:
    3:
    Unirenko bars: More of a bar type but it has built in indicator.
    Usage: Cuts out a lot of ‘noise’ and makes the charts easier and more meaningful.
    Comment: The reversal bars are great indicators for scalping continuation trades.


    2:
    Straight line.
    Usage:
    Identifies swing points and big round numbers.
    Comment: Draw a line at a point that interests you and set an alert. This awesome tool enables you to occupy your mind with something else instead of suffering a mental seizure from watching every tick of the chart.


    1:
    Ichimoku Kinko Hyo: All in one package.
    Usage: At a glance trading. No more having to look to the left, this package does everything for you.
    Comment: Tells you trend, momentum and areas of support and resistance in one go. If my brain could cope with all the colours and imagery I would definitely be using this on my charts. Combined with renko bars this package can be very powerful.
     
    s0mmi and Xela like this.
  2. Xela

    Xela


    I hear you there ... it doesn't half mess up your chart.

    (There are actually ways of simplifying it: the professional traders I know who use it successfully remove the "Chikou Span" and don't usually differentiate between what some people optimistically call "bearish kumo" and "bullish kumo", all of which saves some colour and clutter.)

    For what it's worth, I strongly agree with you, from my own experience, that Ichimoku is about the best you can use, out of the ones I've seen, looked at, researched and used. I used it myself, for more than 3 years.

    The two main problems with Ichimoku, in my opinion (and they're both actually big problems) are ...

    1. There's probably more misinformation and nonsense and lack of understanding around how to use it than seems to be so for any other indicator (many of the "authoritative-looking"/"orthodox"/"specialist" books and websites dedicated to promoting Ichimoku are really full of nonsense about it; forum "information" about it largely sucks; Youtube "information" about it largely sucks).

    2. Most people - it seems to me - try to use it with inappropriate settings (sometimes wildly inappropriate!) for what they're actually trying to do with it: its original settings were designed for trading stocks only, from daily charts only, and that was when there was a 6-day trading week and the calculations were all different.

    I suppose the moral of the tale is that some of the people looking to indicators as a quick aid/short-cut, and/or as a way of "avoiding analysis", are the least likely to put in the necessary time/work to study the thing and work out how best to use it for their own purposes, but to be fair to them, that genuinely isn't easy to do, in the case of Ichimoku.

    (I don't quite agree with you that MACD is one of the three worst - I see some potential value in it, for some people, if only for MACD divergences from price-levels. I think it tends to be used by quite a lot of retail spot forex traders whose grasp of the subject tends to be somewhat limited, but I'll stop now before I sound even more condescending and patronizing than I really am. [​IMG] )
     
    Last edited: Sep 14, 2017
  3. cvds16

    cvds16

    The only thing I use is price action although in context of both ema20 en some sma's
     
  4. FWIW Ichimoku Kinko Hyo is not used that widely here in the land where it was created. Maybe they realized that what the western world finds exotic ain't really that great! In fact it's not included in some of the local charting packages.
     
    johnnyrock, Grantx and Xela like this.
  5. Xela

    Xela

    Little Ichimoku-related digression: many authors writing about it haven't worked out that the Kijun Sen and Tenkan Sen lines are also fairly well known to Western indicator enthusiasts under a different name ("Donchian channel midlines"). ;)
     
    Chris Mac likes this.
  6. Chris Mac

    Chris Mac

    Right, Richard Donchian was the father of trend-following in western world
    Hosoda Goichi was the father of Ichimoku and trend-following in eastern world.
    Great minds.

    CM
     
    Xela likes this.
  7. birzos

    birzos

    There is no best or worst indicator, all indicators will provide a signal, some a little more frequently than others, however the time lag between signals will be too long individually.

    Traders then, via testing, create synthetic indicators, sometimes technically, sometimes fundamentally through their strategy, to reduce the time lag between signals. Most go to far with this but that is another subject.

    We created our own, InsightR, think of it as a more stable Elliott Wave, but combine it with minor indicators, my preferred are RSI, Ichimoku (as a bonus it looks nice if you have good charting), Parabolic SAR, and some EMAs here and there, but that is arbitrary as the primary signal is InsightR, scaled to each timeframe.

    Now, our algo is resource intensive, on 100ms bars it recalcs every 50ms, with just forex instruments were blowing the servers, but a few evolutionary tweaks here and there solved that. It's taken a couple if years to make it production ready and still have to implement the auto trade and risk management algos.

    So no best or worst exists, just those that match your combination of experience, tools, capital, psychology, timeframe, among others. You will gravitate to the ones that feel correct, every trader is different.
     
    eo1989 and Grantx like this.
  8. You do realize, don't you... that' you've describe "straight line" as both "best and worst". Well, at least you got it about MACD. Stupid. 2nd derivative of price. If you haven't figured it out before the "MACD cross"...

    (When somebody tries to explain a market thingy using "MACD", or "cycles", I immediately change channels.)
     
  9. Handle123

    Handle123

    There is no best or worst and when I read this I see "lack of knowledge", whether it is Ichimoku Kinko Hyo or fibs, Bollinger Bands, geometric design, reasons they work is a called "following" and following produces volume, and volume pushes the market. Price action works cause many use, there is nothing special of some line along the lows or highs unless a ton of people put then money at risk there and if there are hedge funds who stick out then tongue and say we pushing through, they will win. None of it matters cause the ONLY thing you can somewhat control is risk management and yourself.

    What is best is whatever will make profits and least losses for you. Ten or twenty years from now, what you once thought was crap, you might change your mind.
     
    cartmm, beginner66, comagnum and 2 others like this.
  10. Simples

    Simples

    Nail is better than screws or screws are better than nails?
    Hammer best for screws and screwdriver best for nails?
    Pick your poison now!
     
    #10     Sep 14, 2017