# Relevance of long term indicators for short term trading



## pavilion103 (1 July 2011)

I know the number of indicators can be overwhelming at times and not terribly useful when too many are used at once for entry.

I am currently working on a shorter term system (holding a few days to a few weeks) and noticed something interesting in my testing. Applying the 200 day MA to my chart (which I will look to use for my longer term strategy) I noticed that quite frequently the 200 day MA represented turning points or price consolidated around this point. It appeared to be a point of support or resistance quite freuqently. 

So my question is: Do people find medium/long term indicators useful for short term trading? and how religiously do they stick to this?

I found for myself that taking into consideration the 200 day MA can:
- make me more aware of exactly where the trade is in the longer term trend
- be used to determine the profit potential (e.g. if the MA is just ahead/below it may be wise to wait and see if it crosses)
- be used in conjunction with my short term MA (but I won't have any hard and fast rule that I can only buy when entry for my shorter term trade is above the 200 day MA, but rather it must be above my short term MA).

No doubt this will be the case with other indicators and maybe this is just common sense, but for a beginner like me this opened my eyes for the need to be aware of exactly where the trade is in its long term cycle.


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## KurwaJegoMac (1 July 2011)

What you sometimes find with certain indicators is that they can become self-fulfilling. The 200 day MA is a good example because it is very commonly used as a 'long term indicator'. So if enough people believe in the 200 day MA, they will buy/sell at turning points and create areas of support or resistance - thus confirming their belief that the 200 day MA is a worthwhile indicator and thus attracting more investors/traders to use that as a signal.

So you need to be careful when using indicators of any sort for this reason. Generally indicators are a distillation of price action and require at least one input from the user (such as a time period) - this makes it open to curve fitting and can therefore put the trader in a dangerous situation. Not to mention that it is also a 'lagging' indicator which in itself causes issues.

A MA can be used to 'smooth out' the price action to see whether it's in a sideways range, rising/falling rapidly/slowly. Based on this information one could use it to tilt the 'odds in their favour'. That is to say, opening a position only when the general market is in a 'uptrend' based on a 'long term indicator' and ignoring trades if the market/sector is in a 'downtrend'.

Personally I trade on price action alone and use no indicators (save for low, high, open, close and volume if you want to be pedantic about the definition). I don't like using indicators for the reasons specified above. If i'm interested in the overall trend of the market i'll just open a 12 month view and look at the chart (of course this is biased to my own perception and the selected timeframe - once again skewing results so i tend not to use this much unless im switching between a sideways or bull market strategy).


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## Frankie (1 July 2011)

I also don’t use indicators.

I use the price action to determine if there is a pattern I can take advantage of.

I use the peaks and troughs to help me set profit and loss targets.


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## Gringotts Bank (1 July 2011)

Parabolic SAR (.017,.017) is superior to SMA (200).  Tighter fit, less lag.  Trade aggressively when above, stay out or lighten exposure when below.


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## Tanaka (1 July 2011)

While day trading I find long term trend analysis to be a distraction. I know this will probably be an unpopular opinion, but having a bias on where the market is heading doesn’t actually tell me what the market is doing now (live), the market will do what it wants *intraday* on its way up or down. 

It’s another story if you are a swing trader.


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## tech/a (2 July 2011)

Bit different to most here.
I want to know where a move is in it's life --- longer term.
If my analysis indicates a bull run is nearing an end then short term bullish trading will generally be less aggressive where as any shorting will be more aggressive. I use both Elliott and VSA in various timeframes to determine this.Short term analysis you'll find often precedes long term moves.however turning points can be alerted early enough to take advantage of.
I will at this time sometimes hedge any over night trading---- with an index trade.
Or if aggressive run an index trade in support,while holding overnight.

This I believe to be a key to maximizing short term discretionary trading.

On indicators
All look as if they coincide remarkably with charts in hind site
For entry and exit I agree price action is best.


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