Trading Indicators Are Useless

[Magdoran]

Not really Always had a great deal of respect for Elliot and Steidlmayer Stratagies.Just didnt use them---didnt need them as I traded/Trade longterm portfolio Systems trading.



Trading short is a necessity in my view if your trading in shorter timeframes.
As for payback,if you mean that which the market has provided--I have no complaints,its NOT improvement I'm looking for its a new TYPE of trading.
Like when i went from Buying and holding Houses to Developing apartments.



Thanks Moggi your patronism doesnt go un noticed.



Thats not my intention.

SNAKE
Pretty heavy going from my memory of around 8 yrs ago.
I guess when you use it regularly its more formost in your mind.
Its really when I saw consistent PRACTICAL use of Elliot that I realised thet this was a serious analysis tool in the hands of trained exponents.

Tech,


Apologies if it came over as patronising. That was not my intention.

I was commenting on how much your tone and focus has changed over the year.

The payback is about the tremendous amount of input you have made on this site, and if you can get something back I though that was great...

The comment about rattle everything that moves is referring to what I perceived to be an unquenchable thirst for knowledge. You do have an inquisitional style sometimes (I’d know, I have been on the receiving end of it).

The comment about falling off my chair when you made those calls was because you surprised me since I had you pegged as a mechanical trader, and you did some really gifted charting to the point that I thought you’d missed your calling it was that good.

Daffy, you really need to learn how to take a compliment.


Kind regards



Moggie

 

[tech/a]

Daffy, you really need to learn how to take a compliment.

I dont look for them.
Ive recieved a few in my time but not on forums.
On forums as you well know you get this constant---

Who the hell do you think you are--George Soros!!
If you're a Fundamentalist---Warren Buffet.

I was commenting on how much your tone and focus has changed over the year.

True, took more of an interest in shorter term. Destroyed a few "Trueisms".

The payback is about the tremendous amount of input you have made on this site, and if you can get something back I though that was great...

That happens all the time and has since I strated on forums 10 yrs ago. Even a singular snippet has proven to be sage advice at times.
Often the message is buried and emerges "When you're ready and capable of accepting it"

"I remember sitting in a room full of Tech Analysts at an ATAA meeting in Adelaide---I went as a guest as Radge was speaking. Radge was speaking on What made you profitable at about 25 mins into a 60 min presentation for me the Penny dropped like a smack in the mouth (Had a few in my time, smacks and penny dropping). I hadnt come looking for anything but sure as hell found it! I just GOT IT! I looked around the room and as Radge delved, demonstrated, explained and questioned it was obvious that the entire room DIDT GET IT. Not that I was a genius, just that THEY werent ready or capable of accepting "WHAT makes you profitable."

This was an ATAA meeting TECHNICAL ANALYSIS makes you profitable, Radge you're not speaking our language!!!

Actually he was they werent UNDERSTANDING his.

The comment about rattle everything that moves is referring to what I perceived to be an unquenchable thirst for knowledge. You do have an inquisitional style sometimes (I’d know, I have been on the receiving end of it).

Actually I used to----but for perhaps 20 yrs dont. I find that anything worth persuing will become aparent very clearly often when you're not looking. The oil floats to the top. Often we are blind to the obvious. OR most see it but DONT RECOGNISE what it is that they see. Ive often posted the "Process of Opportunity"

The comment about falling off my chair when you made those calls was because you surprised me since I had you pegged as a mechanical trader, and you did some really gifted charting to the point that I thought you’d missed your calling it was that good.

In many ways I still am. My care to detail in RISK which I can make mechanical is almost fanatical. My mechanical background has taught me what I NEED to avoid. Ive seen mediocre methods turned into brilliant results by making very small changes. TechTrader is one---a very average methodology---yet its pretty difficult to replicate in real trading for the greater majority.---Is it the analysis which makes the profit?

Oh Moggie/Bronte---Thanks.

No I'm not a Gann fan.

 

[Magdoran]

No I'm not a Gann fan.

Indeed Daffy, presently you are not…

But you could be…

If you dared.


(If you dared to walk on the wild side, and engage on a journey into regions unknown and uncharted by you - limited only by your imagination).


Judging by your tenacity, and ingenuity, and based on the quality of your T/A work of late, I think you have both the capacity and the right attitude to succeed (well beyond even your current high bar – which is already formidable).

But it is not my place to convince you. The door is open, but only you can choose to walk through it and explore what is behind it, or not. I respect that the choice is completely yours.

I still think that the last 12 months has been quite a journey of discovery for many who have contributed to or accessed ASF, and that includes you and I Daffy, wouldn’t you agree?


Mag

 

[>Apocalypto<]

Ok Joseph.
I shall leave you to it. When you discover its weaknesses feel free to post.
Snake

Snake,

Would love you to explain to me the advatages of using momentum on a daily and weekly chart compared to OBV and how it reads volume better.

Regards
Joseph

 

[tech/a]

Indeed Daffy, presently you are not…

But you could be…

If you dared.


(If you dared to walk on the wild side, and engage on a journey into regions unknown and uncharted by you - limited only by your imagination).


Judging by your tenacity, and ingenuity, and based on the quality of your T/A work of late, I think you have both the capacity and the right attitude to succeed (well beyond even your current high bar – which is already formidable).

But it is not my place to convince you. The door is open, but only you can choose to walk through it and explore what is behind it, or not. I respect that the choice is completely yours.

I still think that the last 12 months has been quite a journey of discovery for many who have contributed to or accessed ASF, and that includes you and I Daffy, wouldn’t you agree?


Mag

I have what I need.
Ive looked behind the door. I can and do succeed without it.
Keep it simple.
Its NOT the analysis which makes the profit!
Seems like a conundrum one which you'll know the answer to in the clearest of terms once youve found it.

Moggie perhaps you have your own journey of discovery yet to come.

There is a vast chasm between analysis to APPLICATION of that analysis.
Excellent analysis doesnt necessarily equate to a profitable trading.

Both Technical and/or Fundamental.

 

[motorway]

Hello Trade it ( And everybody else ).... My first post here ..

Ok My focus is on price and volume... And centred on the method, observations and teachings of Richard Wyckoff..

Intersting word indicator... Because maybe that is what We are looking for when We look at a chart ...So looking at price and volume From a Wyckoff perspective is looking for indications at what more informed traders and investors are doing or not doing..

As to "indicators'' They cease being valid when they become time constrained and time distorted... The problem of optimization and time which is speeding up and slowing down producing jumps and not walks....

Ok some things don't suffer from this problem and can give valid indications.

Trend lines for one.. And watching price in relation to a trend line probably can allow one to read in a more timely way all the things indicators purport to reveal to Us ... eg momentum

OBV ... Is an interesting one ... It is not time constrained or distorted in the way a moving average is... But it can be a very blunt instrument.


Who invented OBV....??? and How should it be used..

Wyckoff and /or His associates ... in the early 1930's developed an optimism/pessimism index and when used in two forms created a trend barometer...

Now the two forms were one built from course of sales intra day and the other from the end of day close..

Now both signaled pessimism and optimism.. But of different groups and divergence between the two indexes were as important as with the price.

And the rules for using this as something to give indications was more subtle and in some ways the opposite of the rules of thumb that OBV entails..

Wyckoffs concept of effort and result (The force the Volume in relation to the result, the price range and stride produced) was always the key..

With EOD charting an approximation can be made with OBV (end of day) and Accul/Distrib ( approximating course of sales )... When these show divergence then that is a flag giving some indications.

motorway

 

[tech/a]

M/W.

Good to see you around.
More quality added to the board.

 

[ducati916]

motorway

ARMS index ratio [see blog] sounds like the very same thing.

What would you make of the volume on the NASDAQ sell-off in May, as contrasted with the sell-off this past week?

For individual stocks, you will need access to T&S data if you wish to construct an ARMS ratio.

jog on
d998

 

[>Apocalypto<]

Hello Trade it ( And everybody else ).... My first post here ..

Ok My focus is on price and volume... And centred on the method, observations and teachings of Richard Wyckoff..

Intersting word indicator... Because maybe that is what We are looking for when We look at a chart ...So looking at price and volume From a Wyckoff perspective is looking for indications at what more informed traders and investors are doing or not doing..

As to "indicators'' They cease being valid when they become time constrained and time distorted... The problem of optimization and time which is speeding up and slowing down producing jumps and not walks....

Ok some things don't suffer from this problem and can give valid indications.

Trend lines for one.. And watching price in relation to a trend line probably can allow one to read in a more timely way all the things indicators purport to reveal to Us ... eg momentum

OBV ... Is an interesting one ... It is not time constrained or distorted in the way a moving average is... But it can be a very blunt instrument.


Who invented OBV....??? and How should it be used..

Wyckoff and /or His associates ... in the early 1930's developed an optimism/pessimism index and when used in two forms created a trend barometer...

Now the two forms were one built from course of sales intra day and the other from the end of day close..

Now both signaled pessimism and optimism.. But of different groups and divergence between the two indexes were as important as with the price.

And the rules for using this as something to give indications was more subtle and in some ways the opposite of the rules of thumb that OBV entails..

Wyckoffs concept of effort and result (The force the Volume in relation to the result, the price range and stride produced) was always the key..

With EOD charting an approximation can be made with OBV (end of day) and Accul/Distrib ( approximating course of sales )... When these show divergence then that is a flag giving some indications.

motorway

Thank you for that explanation motorway,

I use it with a few other rules to trade, not on its own. It works a treat for me when used in conjunction with the other requirements.

But if u used it on its own to trade you would have a hell of a time, stopped stopped stopped!

 

[>Apocalypto<]

I have what I need.
Ive looked behind the door. I can and do succeed without it.
Keep it simple.
Its NOT the analysis which makes the profit!
Seems like a conundrum one which you'll know the answer to in the clearest of terms once youve found it.

Moggie perhaps you have your own journey of discovery yet to come.

There is a vast chasm between analysis to APPLICATION of that analysis.
Excellent analysis doesnt necessarily equate to a profitable trading.

Both Technical and/or Fundamental.

So true, so true Tech/A

 

[It's Snake Pliskin]

Snake,

Would love you to explain to me the advatages of using momentum on a daily and weekly chart compared to OBV and how it reads volume better.

Regards
Joseph

Joseph,

My comments were more alinged to: what is the difference in the short term?

Volume I feel is of importance with the accumulation and distribution phases over the medium to longer terms whats happening at key points. But short term like one day or week, does volume really matter? If not, then OBV is not really going to add anything. If momentum is the better choice what indicator is of use? Maybe the ADX or RSI would suffice. Ultimately price itself is going to be the one for me.

Once again look at the OBV construction and try to understand it? As I don't use it, due to it's construction, I am no better to comment any further and don't have the time to deconstruct it for you.

Please let me know what your investigation reveals.
Regards
Snake

 

[It's Snake Pliskin]

Hello Trade it ( And everybody else ).... My first post here ..

Ok My focus is on price and volume... And centred on the method, observations and teachings of Richard Wyckoff..

Intersting word indicator... Because maybe that is what We are looking for when We look at a chart ...So looking at price and volume From a Wyckoff perspective is looking for indications at what more informed traders and investors are doing or not doing..

As to "indicators'' They cease being valid when they become time constrained and time distorted... The problem of optimization and time which is speeding up and slowing down producing jumps and not walks....

Ok some things don't suffer from this problem and can give valid indications.

Trend lines for one.. And watching price in relation to a trend line probably can allow one to read in a more timely way all the things indicators purport to reveal to Us ... eg momentum

OBV ... Is an interesting one ... It is not time constrained or distorted in the way a moving average is... But it can be a very blunt instrument.


Who invented OBV....??? and How should it be used..

Wyckoff and /or His associates ... in the early 1930's developed an optimism/pessimism index and when used in two forms created a trend barometer...

Now the two forms were one built from course of sales intra day and the other from the end of day close..

Now both signaled pessimism and optimism.. But of different groups and divergence between the two indexes were as important as with the price.

And the rules for using this as something to give indications was more subtle and in some ways the opposite of the rules of thumb that OBV entails..

Wyckoffs concept of effort and result (The force the Volume in relation to the result, the price range and stride produced) was always the key..

With EOD charting an approximation can be made with OBV (end of day) and Accul/Distrib ( approximating course of sales )... When these show divergence then that is a flag giving some indications.

motorway

Motorway,

good to have you here.
Notice how Hank wrote a book?

 

[motorway]

Ducati

Some comments on and by Richard Arms at a seminar He gave:

"Volume is key! It tells you what is happening.
Buy a car, you want to see the engine, does it have the power to get up the hills?
He took the (Richard) Wyckoff course
Stock Market Course they call it now.
If you can still get them, it's good work.
They used to loan the material, with a lock and key."

So I would expect His work is built on that foundation..
ease of movement etc are Wyckoff terms...

Market breath I have a 1909 article on

I once saw a who's who of who had done that Wyckoff course.. So a lot of TA is can be traced to Wyckoff..

Take trend lines..

From a Reuters seminar on TA

"Trendlines are one of the simplest and most useful
indicators in Technical Analysis. They also happen to be
one of the most misused.
"One of the biggest mistakes made by beginners and
professionals alike, is inconsistently defining and
drawing the trendline. To be useful, the trendline must
accurately reflect the definition of the trend."
(Victor Sperandeo)
The Classic Trendline
THE WYCKOFF TRENDLINE
The principles and conditions that make up the
"classical trendline" are in many respects a variation of
Wyckoffs original findings on this subject. Wyckoff
included the following conditions:
Firstly, he argued that a trendline requires you to join only
two price extremes as opposed to three. He qualified this
by specifying that the two price extremes had to be
consecutive and of similar magnitude.
This condition of similar magnitude to validate a trendline
is now disregarded by most traders . It is however, an important measure
of the change in trend. For instance, if a Wyckoff trendline
is breached, the concept of similar magnitude indicates the
degree of the change in trend of that particular time frame.
A second concept included by Wyckoff in his analysis of
trendlines, was the idea of a trendline that is "recovered".
In other words, the concept that a breach of a trendline
does not always automatically render that trendline invalid."

Which Brings Us to analysis of the NASDAQ


The Wyckoff 5 Step Method

Step 1:

Identify the trend and the position within that trend of the general market.

Ok The particular tools Wyckoff used for step 1

are 1) Trendlines (normal and reversed) So with the NASDAQ That would be a Valid demand line and an overbought line... NASDAQ Is in a uptrend..

But with price extended right over the top of the overbought line

2) 1/2 way points (are used as a measurement of relative strength on a rally or reaction. )

3) Thrusts, ( The price difference between consecutive tops in up trends or between consecutive bottoms in downtrends.)
and 4) Figure Charts.


OK IF you draw a Valid trend channel

Then this comment is pertinent to the May action and the most recent

"The importance of the reverse use of trend line is that it is determined by points at which the opposition came in to stop the move. The reverse use of trend lines is drawn through where it is stopped, where the opposition came in and actively stopped the trend, to stop it and reverse it even on a temporary basis. Later on supply might come in at the same angle to stop the move again."

So on this basis the action is the same... The trend is the same and the position in the trend is the same..

Price weakness last time was very weak there was significant "ease of movement"

With this recent action You can easily see a lessening of stride ( same effort less and less result ) before the climatic day..


Wyckoff I think would suggest now there are always those who buy on reactions on dips.. So it is the character of the next rally that is what matters

He would have been long the NASAQ and on substantial profit

He believed in tight stops allowed by correct entry... Raised to break even
at first valid opportunity... But then plenty of lee way to allow for natural reactions and to allow profits to run...
He looked to exit on indications ..

So if He did not exit already, he would probably suggest trailing the stop behind the next rally..

We would be looking at the ease of movement of this rally
How much do the bars overlap, How narrow are the bars.. Where are the closes... What is the volume etc..

A substantial pullback in the NASDAQ when you look at the charts was
not unexpected.. At this stage it could be a shakeout... or preliminary supply
and the start of a major down move... The character of the next rally will
tell Us more..

I don't invest/trade in US stocks So the remarks are general..

If the next rally fails and your stop is triggered
You probably have a very good short..

We have had a sign of weakness... So a failed rally is what Wyckoff called a
last point of supply...

In an uptrend
A Wyckoff Buy
is at the bottom of a reaction
So that was the lows after May...

Up at the overbought line...
We are looking for shorts
until a new trend channel establishes itself

Wyckoff advised looking at daily weekly monthly and point and figure charts

tech/a thanks for the welcome

Under Step 1
You could see Elliot wave being a tool (Or anything else if it works)
Some well known Wyckoff traders are Elliot wavers too..
I know very little about EW... And not sure what Wyckoff would have thought.
He saw His system as complete And advised not mixing methods..

Even a normal reaction would will be significant

" Every change in the market consists of waves of buying and selling that last just as long as they can attract a following. When the following is exhausted for the time being, the wave ends and a contrary wave sets in."

Another thing Wyckoff did not like market weighted indexes.

He preferred to pick the 5 most sensitive stocks (in a market or a sector)
average their price and add their volumes and use that for market analysis.

The price volume relationships then were both amplified and had more clarity.

As to the anticipated extent of a move... Here he used P&F in a special way
The peculiar characteristic of a P&F chart to move in 45 degree angles
and its way of measuring a trading range by fluctuations and not time ..

Fluctuations tease out and crystalize contingent demand and supply
what Wyckoff called cause and effect...

Potential energy...

So there is a start at some Wyckoff analysis.


motorway

 

[motorway]

Hello snake

Thank you for the welcome.. I know of USA sites where there is good wyckoff
discussion even then Wyckoff is almost like it is under lock and key..

So I noticed the serious and worthwhile discussions on this forum and thought I would give it a go...

I was interested in P&F for 15 yrs... that led Me to Wyckoff about 3 yrs ago
And I continue to be amazed by the material and always learning new things..

Yes There is So little available directly on Wyckoff Method

Hank Pruden's material is good...
So His book should be ...

It Can be pre ordered on Amazon..
Hits the shelves in April..

motorway

 

[It's Snake Pliskin]

Hello snake

Thank you for the welcome.. I know of USA sites where there is good wyckoff
discussion even then Wyckoff is almost like it is under lock and key..

So I noticed the serious and worthwhile discussions on this forum and thought I would give it a go...

I was interested in P&F for 15 yrs... that led Me to Wyckoff about 3 yrs ago
And I continue to be amazed by the material and always learning new things..

Yes There is So little available directly on Wyckoff Method

Hank Pruden's material is good...
So His book should be ...

It Can be pre ordered on Amazon..
Hits the shelves in April..

motorway

Motorway,

I have all of his articles but he has taken them off his site, only some in Spanish are left.
I won't get the book because I feel it will be regurgitation of what I have. the wyckoff technique is simple really but learning it in the first place can be an expensive affair (i hear) or a patchy affair. It is something I feel the masses don't need to protect its value as a viable system. I agree PF charts are good things, showing the extent of the cause.
I looked at constructing my own barometer based off Wyckoffs but it seems too much of a task for me.

Talk to you later.
Snake

 

[ducati916]

motorway

Quite a long and detailed post. This section interested me.

As to the anticipated extent of a move... Here he used P&F in a special way
The peculiar characteristic of a P&F chart to move in 45 degree angles
and its way of measuring a trading range by fluctuations and not time ..

That now makes a number of methodologies that incorporate this 45 degree line; Gann and now we can add Wyckoff.

Now intrestingly I had never really looked at the previous trend lines in this context, but the Gann dominance of the 45 degree line had intrigued me, viz. what rational explanation, if any, was there?

For the answer, we need to refer back to Keynes, and his General Theory of Employment, Interest & Money here we find the theory of Economic equilibrium which is expressed in alebraic form;

PE = C + c[1 - t]Y + I + G + NX

PE = Planned Expenditure
C = the amount of output consumers wish to consume
c[1 - t] = consumers disposable income [after tax]
I = the amount of capital investment via business
G = Government investment in capital goods
NX = net exports
Y = total expenditures/total income

Once the eqation is solved via inputing the necessary values, you are left with PE = Y which if plotted graphically, represents a 45 degree angle.
This = equilibrium.

The stock market has subscribed to equilibrium theory since almost the year dot, and if used correctly can become a very useful and profitable tool.
Statistically, equilibrium theory carries a high probability level, with a 95% confidence level and standard deviation of 2.

jog on
d998

 

[motorway]

I have all of his articles but he has taken them off his site, only some in Spanish are left.

They are still there and available but the links are not
If you have the article page bookmarked that page is still available..

I won't get the book because I feel it will be regurgitation of what I have.

Hopefully We get to look inside it a bit.... Only one section is on Wyckoff
out of the three..

the Wyckoff technique is simple really but learning it in the first place can be an expensive affair (i hear) or a patchy affair.

Well there are subtleties to it.. it is very methodical and logical.. But will be only as good as the judgement that one develops through experience.

He said it was like crossing a busy street.. You just did it always gauging and judging when to move when to hold bobbing weaving through the traffic..

You can give a child all the rules.. But it is only experience and judgement that makes the crossing safe and sound..

We have to be able to recognize strength and weakness.. Strength in weakness and the weakness in strength... he also said it was like a movie
Some get who did it after the first few frames.. Some sit through halfway
some still don't know after it is finished.. What I have seen of the course has a lot more in it .. It is still available .

It is something I feel the masses don't need to protect its value as a viable system.

Wyckoff is not about working because others don't or do use it..
Wyckoff is about demand and supply..

And the fact that there are different groups in the mkt ( very modern idea far from the one time horizon same resources same knowledge rational man of EMH,.. )

The more informed Vs the less informed..
Those with huge financial resources Vs those who haven't
Different time frames.. Risk tolerances etc etc

And the fact that mkts are manipulated by everybody..
But that those with the biggest wallets will have the most significance..

Just the act of choosing to buy sell or not manipulates the mkt..
The simple interaction of market and limit orders manipulates the mkt.
The way people are and the way they act manipulates the mkt..
Those waves of buying and selling..

So analysing supply and demand will always work
and always provide opportunity..

And probably there are more who what to be told by someone or something what to do anyway... Than develop their own judgement ..

Wyckoff said of most people

There are those who think they are studying the market when all they are doing is studying what someone has said about the market...Not what the market Has said about itself

Wyckoff is against all mechanical methods
even the tools like trend lines are not to be used mechanically.
Everything is sensitive to what is happening..

There will always be accumulation, distribution , marking up and marking down

motorway

 

[It's Snake Pliskin]

Good points Motor!

 

[rcctradings]

Nizar,

Tech, (and I do think he is a gifted technical analyst of some note in his own right) has recently focused on the Miner/Fisher school of Elliott Wave theories, hence you should be aware of the Prechter school of thinking which historically brought EW back into vogue after decades of obscurity.

Prechter and Frosts book on EW is a must read in my view if you really want to learn EW. At least know what it is about even if you depart from it, or adopt a modified style.

Magdoran

Hi Folks,
I've been un-earthing skeletons in my quest and looking up Prechter from this discussion, I've come across the following article:
http://www.avaresearch.com/articles/713/The-Embarrassing-Track-Record-Of-Robert-Prechter-Part-1.html
Who is right? Who is wrong? Is he worth reading about?
Any views highly appreciated!

 

[minwa]

Hi Folks,
I've been un-earthing skeletons in my quest and looking up Prechter from this discussion, I've come across the following article:
http://www.avaresearch.com/articles/713/The-Embarrassing-Track-Record-Of-Robert-Prechter-Part-1.html
Who is right? Who is wrong? Is he worth reading about?
Any views highly appreciated!

No one is "right". Only the market and your profit & loss in your account is right.

Do be aware of loudmouths in financial media - eg. Prechter. Not saying dismiss him automatically, just do a bit of research, a bit of reading of his material and applying them, see if it fits you and works for you.

Personally I think Elliot Waves are a joke. But my personal opinion hardly matters. There are many Theorists that think they can predict the turning point to the next wave. Give it a go yourself see if its works for you.