The best T/A indicators

[BBand]

Hi Prof
Completely agree !!!!!!!!!!

I've used indicators "successfully" for years.

I think we put too much emphasis on our entry and exit strategies as our reason for trading successfully.

Whether its TA, and any of its numerous forms or FA, no matter how good we think our analysis is or which method is "superior" - its still a probabilties game - and how we manage the trade determines how much we win or lose - NOT our entry or exit

This is of course speaking from a discretionary point of view where we have the option to trade in our own best interest with what the market offers.

My biggest step forward as a trader was when I realised that I did not have to wait until my stop was hit before exiting, once my analysis is proved wrong - if I stay in the trade - I'm gambling

When I enter a trade I start looking for an exit until price action proves my analysis correct

Quite simple really

 

[amory]

Hi there,
i have been introduced recently to the coppock indicator and looks good. Its data is in excel format and i am going to use it from now on.

For someone like me who does no T/A at all and bases long term buys on "its a good company, its a bank etc" the qu is:

1. is the coppock any good?
2. any other indicators out there. i dont want to have to work too hard at it or be inundated with indicators else i wont use them. so i thought id start with analysing the coppock and one or two others. ive heard the macd is good too.

i have no charting program at home and dont want one either. dont have a huge amount of time to devote to it

cheers
ben

to return to the original question: 1. Coppock ... a good trend-change indicator. some traders rely on it quite successfully.
2. breakthru of a short-term thru a longer-term EOD line ... eg. 3-day average thru 10-day or any other combination is alright.
Macd is alright. combine it with rising volume to be on the safe side.

Now for the charting program. you don't need it, but won't you still need to look at the chart of the stock to see whether what you are looking for is actually happening?

there are any number of sites - forums too, such as TopStocks - where they show you the chart as soon as you call up a stock. what's more, you can specify your own preferences, which averages you would like to see etc.

but the one question no one is raising: without a program of some kind, how do you expect to know which stocks are conforming to your requirements & when? this is the one that's really puzzling me.

 

[It's Snake Pliskin]

Kennas, that spike up and forming of a large pennant (particularly if messy) is a more reliable pattern to break the other way if I remember correctly from Radge.

Seems pretty 50/50 to me from watching intraday timeframes, but I do like the traditional high tight flag. Reasonably reliable.

Patterns can be understood with the use of an indicator. Price action alone is guessing on a grand scale. It is not about right or wrong but knowing what is happening.

If Michael suggests indicators are useless then he has a lot to learn. However, trading simply by taking a signal from an indicator only is mental gullibility of the foolish.

By choosing an indicator one has to ask themselves what is the indicator telling them, what is its construction, and what is its role in being profitable?

 

[MRC & Co]

Linda Bradford Raschke(I think I've spelt that correctly)

Out of interest professor, which indicators does Rschke use?

 

[professor_frink]

Out of interest professor, which indicators does Rschke use?

you're testing my memory out a bit here, but I think she had one setup called the holy grail that involved an ema and the adx.

There has been mention of an oscillator as well, but can't for the life of me remember what is was.

edit: here you go -

http://www.lbrgroup.com/images///raschke_pt2_0304.pdf

 

[MRC & Co]

The holy grail setup, ha ha ha ha, I thought it was a joke until I skim read the link!

Cheers for the link, I will give it a good read.

I know she is big into the market internals.

 

[amory]

Raschke, eh? she's good, no doubt about it. but is the average trader going to set up all these computers & monitors? Benn isn't, he wants to keep it simple.

well, the news is all good Benn! the very first item in her bag of tricks ... I looked up the Professors link ... refers to both the 3/10 EOD lines & the MacD.

<< 1. 3-10 oscillator. The 3-10 oscillator
is “something I’ve been using since
1981,” Raschke says. “It’s the difference
between a three-day simple
moving average and a 10-day simple
moving average. Plus, there’s a second
line which is a 16-period simple
moving average of the 3-10 line. >>

what did I tell you? the 3 breaks thru the 10 & that's a signal! Linda presents it in a slightly different way but the idea is the same. if you want to look up the rest of it I'm afraid you will get confused & discouraged.

but you did mention Coppock. so there you go: the 3/10 & the coppock, as good a pair of indicators as any. mind you, they will only rarely give a signal at the same time. very few indicators do. the MacD is more likely to go with the 3/10, both being short-term signals.

still would like to know how you expect to identify the stocks where the signals match up.

 

[BBand]

Traders successfully using indicators use them because they understand their construction, they are after all just a filter.

They work well when they are applied properly i.e. indicators designed for trending markets (e.g. m.a.'s) provide many whipsaws when used in range bound markets
Similarly indicators designed for range bound markets (e.g. stochastics osc.) becomes saturated in a strongly trending market.
There are exceptions of course e.g. Bollinger Bands which have very good predictive capabilities as well as buy and sell signals across both trending and ranging markets. MACD is another.
Like any method, the more experience that you have using it, your interpretation/ use becomes that much better

Indicators work well with basic chart analysis support/resistance, candlestick patterns etc

Like most (every?) type of signal, its best to have confluence with signals generated by another method, before taking a signal, the bar following the signal bar should show signs of follow through at least at the open.

However, if you are not comfortable using indicators - DON'T USE THEM!
Whatever trading methodology you use - it MUST fit your personality/psychy

 

[MichaelD]

If Michael suggests indicators are useless then he has a lot to learn.

Erm - I don't ever recall saying anything of the sort. (See next point).

Traders successfully using indicators use them because they understand their construction

I use indicators to trade, but apart from my long term trend following system (wherein the edge is in the money management), they are used in unconventional ways. Those that trade solely using indicators conventionally to provide an edge are doomed.

 

[BBand]

"They are used in unconventional ways"
Yes , yes, yes Michael this is how I use a couple of them - I've made them my own and I have total faith in them.

However, this comes from a lot of time put in experimenting and observing. Newbies have to start somewhere though.

People buy systems that have a proven track record of profitability - yet for some reason they cannot generate a profit using them - why is this?

It does not fit their psychy!

A pure waste of money.
The best methodology is one which you design for yourself .

I don't know if good traders are borne that way, or if its something that they have to develop
I'm a reasonable trader, but I could be lots better, and its taken me years to get to the stage where I am.

Becoming a good trader takes years of hard work, its not as simple as some people would have you believe
Professionals love newbies, the more the better

However putting in the hard yards is recommended, take your time, trade small, very small, until you get established. The results are well worth the effort.

 

[amory]

amidst all this philosophical input, it would be nice if one could hear from Benn again. after all, he's the one started it all. more specifically I should very much welcome a reply to my question & which was:

... still would like to know how you expect to identify the stocks where the signals match up.

 

[MichaelD]

... still would like to know how you expect to identify the stocks where the signals match up.

I think he wants them handed to him on a plate.

 

[Naked shorts]

I think he wants them handed to him on a plate.

The snawsberries take like snawsberries

 

[sails]

... still would like to know how you expect to identify the stocks where the signals match up.

LOL guys

Amory - most use software to search for stocks meeting their signal criteria. There are many available, but Incredible Charts is one that's free and has scanning capabilities and probably a good place to start...

 

[amory]

you are absolutely right Sails & we all use one system or another to help us in our search. but one still would have liked to know how Benn intends to go about it, seeing that "...i have no charting program at home and don't want one either" ... as he puts it. so its not much use suggesting Incredible Charts etc is it?

 

[sails]

you are absolutely right Sails & we all use one system or another to help us in our search. but one still would have liked to know how Benn intends to go about it, seeing that "...i have no charting program at home and don't want one either" ... as he puts it. so its not much use suggesting Incredible Charts etc is it?

Yes, sorry - didn't read the whole thread

 

[amory]

just for fun I'll show a Metastock formula for Coppock. like all good indicators, there are two important signals to watch out for: 1) any change of direction & 2) break thru zero.

it will be noticed that I have de-activated the last couple of lines by means of brackets { } but that's just a matter of personal taste.

(ROC(CLOSE,9,percent )*8 +
ROC(CLOSE,5,percent)*8 +
ROC(Ref(CLOSE,-1),9,percent)*7 + ROC(Ref(CLOSE,-1),5,percent)*7 + ROC(Ref(CLOSE,-2),9,percent)*6 + ROC(Ref(CLOSE,-2),5,percent)*6 + ROC(Ref(CLOSE,-3),9,percent)*5 + ROC(Ref(CLOSE,-3),5,percent)*5 + ROC(Ref(CLOSE,-4),9,percent)*4 + ROC(Ref(CLOSE,-4),5,percent)*4 + ROC(Ref(CLOSE,-5),9,percent)*3 + ROC(Ref(CLOSE,-5),5,percent)*3 + ROC(Ref(CLOSE,-6),9,percent)*2 + ROC(Ref(CLOSE,-6),5,percent)*2 + ROC(Ref(CLOSE,-7),9,percent) + ROC(Ref(CLOSE,-7),5,percent))/3
{+ROC(Ref(CLOSE,-8),14,percent)*2 + ROC(Ref(CLOSE,-8),11,percent)*2 + ROC(Ref(CLOSE,-9),14,percent) + ROC(Ref(CLOSE,-9),11,percent)/2)}

it's a reasonably complicated formula, but on chart it comes up clearly at a glance. what more can anyone ask?

 

[amory]

still on Coppock... well, that formula is actually not a MS formula, its only written in MS language - can't remember where I came across it.

but Coppock is mentioned in Incredible Charts, with the following specifications:

<< To calculate the Coppock Indicator:

Calculate 14 month Rate of Change (Price) for the index. Use monthly closing price.

Calculate 11 month Rate of Change (Price) for the index. Use monthly closing price.

Add the results of 1 and 2.

Calculate a 10 month weighted moving average of the result.
There are a number of variations in calculation. For a more timely signal, try substituting the daily equivalent in place of monthly figures: 294 day ROC, 231 day ROC and 210 day weighted moving averages. >>

... and I seem to remember they describe it as slow but reliable. which would make it ideal for the long-term investor/trader.

 

[MS+Tradesim]

you will never meet a millionaire trader who uses indicators its just the reality.

Since I know for a fact that this is not true, I have to assume that you are simply speaking from your experience - but as someone already pointed out, absolute language creates traps as only one exception need be found to invalidate the claim.

I would say indicators as popularly used have limited value. For example, I've lost track of the number of times people on this forum have said things like "The RSI(14) is way oversold. Expect a reversal." But this indicator can spend significant amounts of time in overbought/oversold territory - and the overbought/oversold areas are largely arbitrary. Who decides what makes an instrument overbought/oversold? How many people have actually extensively back tested an indicator on its own to determine validity from its supposed signals? If you are going to use indicators, it is important to find those (and values) which work for the instrument/market you are trading and know why they work and when they are likely to fail.

 

[BBand]

COPPOCK INDICATOR
This is an indicator used by Colin Nicholson, in his book "The Aggressive Investor" page 72.

He mentions that "readers are invited to download an Excel spreadsheet from the Data Files page of www.bwts.com.au that shows each step of the calculation, including the weighted moving average, and has over 100years of historical data for several market indexes"

He mentions that the Coppock was designed to buy early in a bull market with the professionals.

Don't know much about this indicator, but remembered that I had seen something on this in Colins book.

Anyway, a visit to his web site may help