Trade entry or trade management

On the thread about worst indicators, easyrider posted about one author's results that he never found any system based on indicators that worked. I always wonder what these guys mean by "worked". I am presuming they mean that entering and exiting with an indicator produces net profits. Given that definition, the authors are probably right.

The prevailing thought is that using indicators can help skew probability in your favor such that entering with an indicator or two improves the odds of a trade moving in the desired direction versus jumping in anytime yelling "yeeehaw I'm a traderman."

Following that premise is the concept that trade management is the real key, ie., where to put the stoploss, when to take profits, partial or full, etc. I agree with this concept.

To be sure, I am not talking about scalping. In my very limited knowledge of scalping, and after having sat for two days with the number one guy from a well-known prop firm, I have to say entry is buy far the most important part of that trading style.

 

I don’t believe that using indicators helps skew the probability in one’s favor. Certainly if that were possible, trading would be the easiest thing in the world. All technical indicators lag behind the price action and volume. I do believe that our “interpretation” of them certainly “skews” our decisions and actions. That’s one of the most beautiful things about TA, it’s a self-fulfilling prophecy. The masses are watching the same thing, and a very small minority profits from it on a consistent basis.

The indicators are what they are, it is “we” who are the worst indicators. I agree 100% that the most important key is trade management. The best trade management is the one that is planned before the entry. I was once an “anal-yst”, trying to predict what was going to happen, and usually I came up with the answer after it happened, and missing the opportunity. After awhile I cut all of the fat and meaningless (to me) indicators from my screen.

I use half a dozen indicators, and I try to avoid having too much “spaghetti” on the chart. That has been working for me. Sure I could take a lot more off of the table if I used more indicators. I prefer to use fewer indicators that I know well, and take money out of the market more consistently.

Good post, buddy. Good luck!