# Which indicators do you choose?



## pavilion103 (1 September 2011)

I've often heard that keeping things simple in the market is the most effective way to consistently make profit. At the same time I understand that using a couple of indicators can be quite beneficial. 

Before I ask any questions, I understand that everyone is different and there is no one correct answer, so I ask out of curiosity to hear what most traders find effective in their personal trading.

1. Which indicators do you like the most?
2. How many indicators do you use?

These are ones that I have recently read about and am considering using. I will test these and then would like to use maybe 1-2 of them in my trading. 

- MACD
- Relative Strength Index (stock price compared to All Ords or Index)
- Force Index (Alexander Elder uses this)
- New High-Low Index


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## Billyb (3 September 2011)

pavilion103 said:


> I've often heard that keeping things simple in the market is the most effective way to consistently make profit. At the same time I understand that using a couple of indicators can be quite beneficial.
> 
> Before I ask any questions, I understand that everyone is different and there is no one correct answer, so I ask out of curiosity to hear what most traders find effective in their personal trading.
> 
> ...




Do you mean RSC instead of RSI? I do like to use the RSC. RSC appeals to me because it's different to all the other indicators - it gives new information not inherent in the symbol's chart - whereas all the other indicators I know off seem to just be presenting the price (or volume) action in a slightly different form.

The new high-low index you mention looks interesting, I shall look into that


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## tech/a (3 September 2011)

The problem with RSC is that by the time you see an opportunity it's all over.
It's not a leading indicator.
Anything calculated  from past data will always be far too slow for practical application.


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## Gringotts Bank (3 September 2011)

There are some nice adaptive indicators around, usually paid versions.  They adapt to market conditions, bar by bar.


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## joea (4 September 2011)

pavilion103 said:


> I've often heard that keeping things simple in the market is the most effective way to consistently make profit. At the same time I understand that using a couple of indicators can be quite beneficial.
> 
> Before I ask any questions, I understand that everyone is different and there is no one correct answer, so I ask out of curiosity to hear what most traders find effective in their personal trading.
> 
> ...




I do not think its about the indicators that you choose, its about what you choose them for. So you choose the one you think does the best job.

You have trend, momentum, volatility and market strength.

Trend............ Trendlines( support %resistance)
Momentum......MACD Histogram(perhaps)
Volatility.........Average True Range (ATR)
Market Strength......Volume

Bullish and Bearish divergence will give you and edge, but while one indicator may pick it up, another may not.

In Carolyn Boroden book Fibonacci Trading she explains the "Ideal Set Up" with utilises 
pattern(HH's &HL's or LH's &LL's) , symmetry projection, (where the projection is in relation to 34EMA) and CCI indicator. Trading naked site shows the divergence patterns.

I bought the book, she explains the setup and I implement it . Simple.
joea


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## Billyb (4 September 2011)

tech/a said:


> The problem with RSC is that by the time you see an opportunity it's all over




A worthy point made for short term traders. Horses for courses I think. I like to use it the way Weinstein mentions in his book, to identify whether a stock is outperforming the parent index, for this I find it useful.



tech/a said:


> The problem with RSC is that by the time you see an opportunity it's all over.
> It's not a leading indicator.
> Anything calculated  from past data will always be far too slow for practical application.




I suppose every indicator is calculated from past data. Even the so called leading indicators.


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## joea (4 September 2011)

Billyb said:


> A worthy point made for short term traders. Horses for courses I think. I like to use it the way Weinstein mentions in his book, to identify whether a stock is outperforming the parent index, for this I find it useful.
> 
> 
> 
> I suppose every indicator is calculated from past data. Even the so called leading indicators.




In Achelis book of Techical analysis from A to Z it quotes on the Williams%R indicator, "An interesting phenomenon of the %R indicator is its uncanny ability to anticipate a reversal in the underlying security price. The indicator ALMOST always forms a peak and turns down a few days before the security's price peaks and turns down. Likewise %R usually creates a trough and turns up a few days before the security's price turns up."
Its in my stable as a momentum indicator. 
That is why I purchased the book to find the weaknesses and strength of indicators  that may be applicable to do a job.

The VSA application on a chart would be another method of analysis that cannot be overlooked.

Comment on RSC. I think a comment on this particular indicator should include a time frame, as I would agree with the above that in short term trading and  day trading it may not be applicable. 

I think Weinsteein make two good points, one is RSC and the other is the 4 stages of a stock cycle.

I use RSC  to look at sector and commodity analysis agains the XJO. Overlay of say the gold price against the XJO may be ok in relation to trading gold stocks. But I am looking at emerging companies in this area. So I am watching the gold price direction plus XJO sector direction comparison.
once a week analysis.!!!
joea


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## Wysiwyg (4 September 2011)

joea said:


> The indicator ALMOST always forms a peak and turns down a few days before the security's price peaks and turns down. Likewise %R usually creates a trough and turns up a few days before the security's price turns up."



Hi, I can't find any instance where the W%R indicator turns up or down before price movement. Nowhere.


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## joea (4 September 2011)

Wysiwyg said:


> Hi, I can't find any instance where the W%R indicator turns up or down before price movement. Nowhere.




I can!
Go to BND, the 11th/3rd is the lower trough, then on  the 15th/03 it show a higher trough while price bar was wide range and price went down further..
At the moment W%R shows a flat line to Friday but CCI  13 &34 has a bullish dvergance on the current price.
joea


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## Wysiwyg (4 September 2011)

joea said:


> I can!
> joea



Where?


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## joea (4 September 2011)

On BND again 21/07/2010 shows lower trough, then 2 X HH's and HL's on a flat price and no volume.
.56 to .86 at close over 4 to 5 days, that's 53.5%.
joea


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## joea (4 September 2011)

Wysiwyg said:


> Where?




BND look at shaded area.
joea


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## Wysiwyg (4 September 2011)

> On BND again 21/07/2010 shows lower trough, then 2 X HH's and HL's on a flat price and no volume.
> .56 to .86 at close over 4 to 5 days, that's 53.5%.
> joea






> Likewise %R usually creates a trough and turns up a few days before the security's price turns up.



No it doesn't. The indicator reacts to each and every price change.


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## IFocus (4 September 2011)

When I started in the markets the older traders used to talk about volume and price action being the best and only indicators.

The rest being pretty much BS

I struggled with this for a number of years.

Now all I use is volume and price action.................and two MA's to remind me of the trend direction.


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## Wysiwyg (4 September 2011)

Wysiwyg said:


> No it doesn't. The indicator reacts to each and every price change.



I smoothed out that jagged, gnarly line.

```
function PercentR( periods )
{
 return -100 * ( HHV( H, periods ) - C )/( HHV( H, periods ) - LLV( L, periods ) ); 
}

SmoothPR = EMA(PercentR(8), 4);

A = HHV(SmoothPR, 10);
B = HHV(SmoothPR, 60);
D = HHV(SmoothPR, 110);
E = HHV(SmoothPR, 160);
F = HHV(SmoothPR, 210);
G = HHV(SmoothPR, 260);
I = HHV(SmoothPR, 310);
J = HHV(SmoothPR, 360);
K = HHV(SmoothPR, 410);
M = HHV(SmoothPR, 460); 

A1 = LLV(SmoothPR, 10);
B1 = LLV(SmoothPR, 60);
D1 = LLV(SmoothPR, 110);
E1 = LLV(SmoothPR, 160);
F1 = LLV(SmoothPR, 210);
G1 = LLV(SmoothPR, 260);
I1 = LLV(SmoothPR, 310);
J1 = LLV(SmoothPR, 360);
K1 = LLV(SmoothPR, 410);
M1 = LLV(SmoothPR, 460);

Average = SelectedValue(A+B+D+E+F+G+I+J+K+M)/10;
Average1 = SelectedValue(A1+B1+D1+E1+F1+G1+I1+J1+K1+M1)/10;

Plot(SmoothPR, "", colorBlack, styleLine);
Plot(Average, "", colorDarkRed, styleLine);
Plot(Average1, "", colorSeaGreen, styleLine);
```


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## tech/a (4 September 2011)

Why don't you throw up a few charts and just elxplain how you'd apply that to a few profitable trades?


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## pavilion103 (4 September 2011)

IFocus said:


> When I started in the markets the older traders used to talk about volume and price action being the best and only indicators.
> 
> The rest being pretty much BS
> 
> ...




This is what I seem to be reading and what resonates with me the most. 

I want to experiment with using a few indicators myself so I can see their usefulness through my own testing. But I'm thinking price and volume are probably sufficient (once I am able to read them well).


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## Logique (5 September 2011)

Good old volume and OBV, combine with MACD, on the KISS principle. 

To me, it's more important to check by the different time periods than to browse a vast array of different indicators.

I don't understand Elliot Waves.


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## MrMomentum (6 September 2011)

I prefer chart patterns to indicators.

My favourite chart pattern is the peak to trough trend. I refer to this as a “wave trend.”

I also like straight edge trends, support/resistance and triangles patterns.

Indicators confuse me and result in indecision on my end.

If I had to use an indicator is would be one moving average.


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## investorpaul (6 September 2011)

I dont really use charts or indicators anymore (i found they don't suit my investment style).

However when I do I just stick to the basics price, volume, support/resistance, trend lines.


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## cudderbean (10 September 2011)

pavilion103 said:


> 1. Which indicators do you like the most?
> 2. How many indicators do you use?
> 
> These are ones that I have recently read about and am considering using. I will test these and then would like to use maybe 1-2 of them in my trading.
> ...




As others have said volume, trend breaks, support resistance levels and patterns are very important... ascending /descending triangles (watch out if they fail at that 2/3rds mark), engulfing bull and bear, morning and evening stars are my favourites.

I use my own concocted indicator I call “Mood” it’s just an amalgam of RSI, Guppy’s MMA, some Darvas style “magic boxes” (devised by a very generous code writer called Maximo on the Bullcharts forum based on hi and lo breakouts), and another of my inventions: a channel based on price and volume that expands and contracts depending on live volume... tightens if hi vol or approaching 70 RSI or 30 RSI, and expands otherwise to allow the price to breath... similar but different from Elders Force Index

In Bullcharts you can assign a percentage weighting to each component indicator that makes up my “Mood”. I like to see at least 60% before I go long, and <40% before I short. The reversals between the parameters are always interesting times, especially if confirmed with a nice chart pattern. Maybe you could devise something similar for your favourite indicators, put them into a ribbon along the bottom of your chart to eliminate all the noise of the separate indicators so that you can focus on the pattern itself. You can play with the weightings in BC.

But the bottom line for me is the chart pattern.

Also, because so many people use RSI 14 (the usual software default settings), when a stock approaches 70% and 30% especially if it coincides with an important support/resistance level, it becomes a sort of self fulfilling prophecy and a reversal occurs.... but not always of course. However, it’s worthwhile monitoring price action at those moments.

For anyone interested in using Elders Force Index, the formula is
for a 2 day EFI...

=(((Y*(3-2))+((C-c)*v)*2)/3)

where:
Y = yesterday's 2 day EMA of the EFI (if using Excel, go back 30 rows and fill down)
C = today's close
c = yesterday's close
v = today's volume

for a 13 day EFI (that Elder recommends also)

=(((Y*(14-2))+((C-c)*v)*2)/14)

Also, if you want to pinpoint at which price the 2 day EFI would need to be so it exactly equals zero i.e.crossover point from positive to negative (depends on decimal places you use but near enough) Try this formula...

C = ((2*c*v)-Y)/(2*v)

Good luck.


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## bailx (25 September 2011)

For me it's all about having a strong compound within my stock and understanding the integrity of its Movements. live a little on the Wilder side

I like to use a 
10-D MA Resistance line
50-D MA Support line / Stop loss
Accumulation Distribution: Price Movement
ADX: A good indicator of a Change in Trend
RSI; Momentum Swing

Indexing everything sounds more like hear say.


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## pixel (25 September 2011)

tech/a said:


> Anything calculated  from past data will always be far too slow for practical application.



 An interesting suggestion tech/a;

and I agree to the extent that past data, no matter what is extrapolated from them, is never 100% safe for practical application. My problem remains, however, to get my hands on *future data* in time to draw practical conclusions.
(Maybe we can now hire some neutrinos to help us?  The mind boggles...)

More in keeping with the topic though: I use a very short-term adaptation of MACD, from which I mainly extrapolate momentum. That's on the assumption that changing a particular momentum, especially when supported by mass (i.e. strong volume), will take a lot of effort, which - hopefully - can be detected in a timely enough manner to react and save my bacon.


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## tech/a (25 September 2011)

Yes it's one of my more stupid statements as it is obvious that all data is past!
Application of analysis of data in appropriate time frames is required.
Taking a weekly trigger for a day trade for instance or vice versa will likely be of little value.

It's why I find patterns an price action ( range coupled with volume ) to be best for anticipating what will happen now and tomorrow. In all timeframes.


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## pixel (25 September 2011)

tech/a said:


> Application of analysis of data in appropriate time frames is required. Taking a weekly trigger for a day trade for instance or vice versa will likely be of little value.
> 
> It's why I find patterns an price action ( range coupled with volume ) to be best for anticipating what will happen now and tomorrow. In all timeframes.



 I'll second that:
I use a *Weekly *chart just to see where we're coming from; a *Daily *chart to gauge the current trend, especially fluctuations of volume vs momentum; that tells me whether I want to own this share now and follow its course for maybe the next couple of days or weeks.
*Intraday*, I use charts from 30 minutes down to 1 minute to see what's actually happening *NOW*.


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## joea (25 September 2011)

tech/a said:


> Yes it's one of my more stupid statements as it is obvious that all data is past!
> Application of analysis of data in appropriate time frames is required.
> Taking a weekly trigger for a day trade for instance or vice versa will likely be of little value.
> 
> It's why I find patterns an price action ( range coupled with volume ) to be best for anticipating what will happen now and tomorrow. In all timeframes.




Well I do not think it is such a stupid statement when you relate it to two rules.

1 Don't expect the market to behave exactly the same way twice.
2 Todays market behaviour is significant only when it's compared to what the market   
   did yesterday, last week, last month, even last year. 

Your quest for what happens tomorrow is every traders dream.
joea


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## tech/a (25 September 2011)

Pursuit more correct.

Placing yourself in front of opportunity is the end game of analysis.


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## joea (26 September 2011)

tech/a said:


> Pursuit more correct.
> 
> Placing yourself in front of opportunity is the end game of analysis.




Yes that would be a better word.

I see the book you referred to (i think).
Have a alert with Amazon when its published.
joea


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## pavilion103 (10 October 2011)

Is it generally true that not all indicators will confirm the strength of a trade?

For example, if I use VSA and look at the trend of a stock and it all looks positive, and then I look at the relative strength indicator and that is positive too, I want to take the trade. 
Then I look at the MACD histogram and it shows a lower high, despite price making a higher high (bearish divergence). 
Should that be enough to deter me from entering the trade if all other signals appear to be strong? Or is, say, 2/3 or 3/4 signals in my favour enough to enter on?


I'm currently using VSA, relative strength and MACD.


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## Billyb (10 October 2011)

pavilion103 said:


> Is it generally true that not all indicators will confirm the strength of a trade?
> 
> For example, if I use VSA and look at the trend of a stock and it all looks positive, and then I look at the relative strength indicator and that is positive too, I want to take the trade.
> Then I look at the MACD histogram and it shows a lower high, despite price making a higher high (bearish divergence).
> ...




Yes you answered your own question  they do often disagree which brings me to the  question - dont you get confused using so many different indicators? I would but then I'm known for only being able to do one thing at a time so maybe its just me!


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## pavilion103 (10 October 2011)

Billyb said:


> Yes you answered your own question  they do often disagree which brings me to the  question - dont you get confused using so many different indicators? I would but then I'm known for only being able to do one thing at a time so maybe its just me!




I don't really see it as too many. 

VSA is my primary method. 

I simply use relative strength and MACD to confirm the strength of an entry. 
Relative strength is just common sense. If the market is going strong and a stock is struggling then obviously there is a reason why and it probably isn't best to trade it long. There is a section in Wyckoff where this is discussed in conjunction with VSA. 

Then the MACD is simply used as one more piece of confirmation, but not taken as gospel. 

I see the method as quite simple rather than using a whole bunch of other indicators and moving averages etc.


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## Billyb (10 October 2011)

pavilion103 said:


> I don't really see it as too many.
> 
> VSA is my primary method.
> 
> ...




I suppose relative strength is not really an indicator which you use to make trading ddecsions (you can just eyeball the trend) so you're right it's not too many


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## tech/a (10 October 2011)

pavilion103 said:


> Is it generally true that not all indicators will confirm the strength of a trade?
> 
> For example, if I use VSA and look at the trend of a stock and it all looks positive, and then I look at the relative strength indicator and that is positive too, I want to take the trade.
> Then I look at the MACD histogram and it shows a lower high, despite price making a higher high (bearish divergence).
> ...




Relative strength and MACD are Momentum indicators.
they are measuring the same thing so you only need one.
You dont need 2 tools to tell you your in a lift going up---one will tell you that.

What you need is something that gets you in the trade when momentum is gathering not exhausting.----Then follow the volume----


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## LostMyShirt (10 October 2011)

I use;

MACD - Gives Bullish/Bearish signals and crossovers could indicate a buy.

Slow Stochastics - Purely for indicating buy oppertunities.

20, 50 and 100 simple dMA's - Phases out the noise and helps identify trends. I also find that 20 cross 50 dMA indicates (from what I'v seen) further upside.

Volume - Mainly for Sentiment and supply.


These indicators don't predict the future, merely help you paint a picture of the current situation for the use of deducing future trends.


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## motorway (10 October 2011)

tech/a said:


> Relative strength and MACD are Momentum indicators.
> they are measuring the same thing so you only need one.
> You dont need 2 tools to tell you your in a lift going up---one will tell you that.
> 
> What you need is something that gets you in the trade when momentum is gathering not exhausting.----Then follow the volume----




I do not think he is talking about RSI , But CRS...

MACD is connected to Wyckoff concept of Thrust or Stride
(eg as in shortening of the thrust ....)
It is comparative ground gained or lost

CRS is comparative strength or weakness VS eg a Mkt index

Wyckoff uses them in a dynamic  fashion ,,, just  ACTUAL  wave vs ACTUAL wave

MACD & RSI ARE OPTIMIZED OR time framed constrained have a static  lookback in their calculation..

EG A Wyckoff  ( no such thing ) MACD would have to change its parameters to match the duration of each swing as it occurs same with  A Wyckoff CRS indicator....
As long as you understand this .....

Motorway


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## pavilion103 (10 October 2011)

motorway said:


> I do not think he is talking about RSI , But CRS...
> 
> MACD is connected to Wyckoff concept of Thrust or Stride
> (eg as in shortening of the thrust ....)
> ...




Thanks Motorway. Important to consider. 

And yes I was referring to comparative strength. The stock v XAO.


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## Billyb (11 October 2011)

Yes those two are easy to confuse, the "C" is important  i.e "RSC or CRS" vs "RSI"


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