Trading Indicators Are Useless

[wayneL]

Excellent discussion here.
I agree with what Prof said. I think MACD is quite an accurate indicator.

The MACD is precisely accurate... in measuring the distance between two EMAs

 

[ice]

It's darwinian selection.

If the indicators you use don't work you are quickly eliminated from the game.
And make no mistake it is a game. Treat it as such and you have a chance. Take it too seriously and it will eat you up.

FWIW the most compelling indicator I've found is when my wife says "YOU DID WHAT?"...


ice

 

[nizar]

The MACD is precisely accurate... in measuring the distance between two EMAs

LOL i really shouldnt have said that...

 

[theasxgorilla]

FWIW the most compelling indicator I've found is when my wife says "YOU DID WHAT?"...

I notice you said COMPELLING, but not ACCURATE. Doesn't she trade too??

 

[It's Snake Pliskin]

professor_frink,

A quick glance at the chart and you'll see it- And that's why I think indicators get a bad rap- alot of people(especially newbies) look at the indicator first and price action 2nd, when it should be the other way around.

Most indicators aid the eye in determining something, hence your comments on faster recognition. So if looking at price first is that going to be faster or slower? I think slower, though I am talking in the sense of diagnosis using indicators not acting on them before using price. If one needs price to help work out the indicator then the indicator is useless.

Regards
Snake

 

[ice]

I notice you said COMPELLING, but not ACCURATE. Doesn't she trade too??

No, she is both highly intelligent and highly educated; qualities which are major handicaps to successful trading.


ice.

PS. i seem to be digging myself a deep hole here so I will refrain from further comment in this thread.

 

[professor_frink]

professor_frink,

A quick glance at the chart and you'll see it- And that's why I think indicators get a bad rap- alot of people(especially newbies) look at the indicator first and price action 2nd, when it should be the other way around.

Most indicators aid the eye in determining something, hence your comments on faster recognition. So if looking at price first is that going to be faster or slower? I think slower, though I am talking in the sense of diagnosis using indicators not acting on them before using price. If one needs price to help work out the indicator then the indicator is useless.

Regards
Snake

Hi Snake,

In this case, looking at the price action after checking the indicator is going to be slower, so the indicator is pretty well useless. I agree with you on that one. Most of the time(I say most as I'm sure there are exceptions to this) the MACD doesn't tell me anything I can't see from looking at price action. And as I already use MA's in my trading, I don't really see the point in having something below the chart that measures the difference between 2 averages I don't even use, so I don't display it on any of my charts.

 

[It's Snake Pliskin]

Hi Snake,

In this case, looking at the price action after checking the indicator is going to be slower, so the indicator is pretty well useless. I agree with you on that one. Most of the time(I say most as I'm sure there are exceptions to this) the MACD doesn't tell me anything I can't see from looking at price action. And as I already use MA's in my trading, I don't really see the point in having something below the chart that measures the difference between 2 averages I don't even use, so I don't display it on any of my charts.

It appears you have it under control Professor. Like you I feel one MA is ample.

 

[>Apocalypto<]

Hi soultrader,

You make some good points about market profile, but I would have to say again market profile is just another indicator, with positives and negatives. Anyone can have an indicator... it is how you use it that makes the difference. Whilst I agree with you (and don't use the ind's you mention) The daily MACD you show is miss leading if you don't look at the higher time frame. The weekly MACD of the YM will show there has been no crosses to the downside( or even looked like crossing )in the time frame you show since Sept 2006. (Sorry I don't know how to attach a chart.)So the strategy should have been look for pull back to buy in the smaller (dalily time frame) and ingnore anything else until the higher time frame changed.

Market profile is nothing more than a way of measuring POSSIBLE areas of support and resistance and often pivot points line up exactly the same.

The problem with all Indicators(MP, Pivots, MACD, etc,etc) is how you use them and the ultimate indicator the hard right hand side of the Chart.

Incidentally who supplies your tick volume(tick delta), can you get it for markets other than the US markets

cheers

Very well Said I got that impression as well from market profile, what ever you can understand and makes you cash then stick to it no matter what it is T/A F/a

 

[>Apocalypto<]

It appears you have it under control Professor. Like you I feel one MA is ample.

Snake I also only use one MA, more then enough for me.

 

[Kauri]

Given that today is the second day of the current correction, did anyone using an indicator have a timely/tradable warning of this correction?? Have looked through all the posts and I can only find Cannieausek who called it using vol/range interpretation.

 

[>Apocalypto<]

Boys and girls

see attached charts

DJI was easy to see holding any long positions was not looking good 4 consecutive weak days with a break in the trend line, 12600 would have been my stop. Also there was major divergence on the MACD with the dow rising but the MACD weakening with the break in the trend and a smart stop you would have came out of that trade missing most of the drop of yesterdays fall.

XAO was a little more tricky but i was holding 2 X 5525 call options on the xjo till this morning and i did take most of the hit. (wish i had a cfd on that no stops!)

the main problem i saw was yesterday when it closed under the trend with OBV dropping I saw this coming for a while and warned no stopped my girl friend from opening any long positions in the last 7 days!

as you can see the XAO ran into a major top at 5950 and just managed to get to 6000+ with the dow dropping which worried me we where running on vapors in my opinion.

this all gave me the feeling that opening any new long positions on the xjo was not a great idea.

on the short side i now use all my strengh not to short the market during a bull market.

but the dow was a golden opportunity to short XAO not enough evidence to back that decision

Please note i had no idea that the china sell off was happening or did happen till this morning when i saw a 400 pt loss on wall street and had to slap myself to make sure i was a wake!

what i am saying is i sore weakness but i had no idea that would happen!

from today i see a possible bounce of the trend under 5800 on XAO and another possible entry on the long side coming soon, as long as it stays above 5800 trend.

please people let me know if u see holes in my thoughts.

 

[tech/a]

Holes.

Yeh.
The technical information from that or most charts I have seen gave no indication of a spike move down.
From your charts nothing more than a standard corrective move in a solid trend.
To try and present a case after the fact is pointless.
The only analysis that came close were those using Elliot and Volume analysis.
Warnings of possible topping was as close as I have seen to calling it.

Now a warning is enough to place shortterm traders atleast in a position of caution.Smaller positions and looking for shorts in weaker stocks.

Longterm holders could have taken "some " profits from stocks held over 12 mths (Tax implications).

Weak low volume rallies back into the fall will show weakness.
Watch for selling into rallies---this will be big holders selling off some longs.
(Best seen on 10-20 min charts).

Ill be watching today to see if this is occuring here.

 

[Freeballinginawetsuit]

Tech,

Taking a punt and trading the swings is one thing (surely the go is to exit by close). If youre confident of the market and looking for longer term value picks another scenario again.

Personally I would have concerns at holding in the marketplace ATM following volume alone and trying to pick a top of a weak counter rally. Holding O/nite is when IMO the possability of another pullback will occur rendering any stop a 'waste of space' on open.

Several of the stocks I am holding as trades Insto's have entered after me, and near the top. If they decide to exit it will be overnite or bleedingly obvious if intraday. If this happens a trigger elsewhere would seem likely to have nudged them, hence the overnight scenario.

Personally I'm off the opinion this is all a fizzer, certainly of the stocks I'm into volumes have been strong of late.....so difficult to reason why a sudden shift in sentiment over current issues would avail. Fundamentals of these companies hasn't changed one iota........specs, well I've got a couple of them and sold out into strength yesterday.

Anyway the next few days should present some opportunities, good ones or of the burning persuasion.......too early to decide which....probably wise to wait and see what pans out.

I will trade my usual plan

 

[Pat]

Freeball,
I'd love to agree, however can you be sure things will turn around?
I must admit i've taken the same perspective as you, bargans all round, I just wish I was cashed up.
But what if where wrong?
Should we be adapting our strategy?
What is the risk?

 

[Freeballinginawetsuit]

Plenty of risk....agreed, but if you had been a follower of that train of thought the last few years well...
I'm split in two ,funds for trading (never changes) that I move profits into my long positions.
Prepared to risk my trades and sit on my longs. After 3 years at it I've been fortunate enough to have been in a lucky marketplace........the Risk? is all relative now.

If you were in the marketplace for the last couple of months,funds limited and holding as of yesterday..... I'd be looking at all my options and especially not making any rash decisions.

 

[machi]

The only analysis that came close were those using Elliot and Volume analysis.
Warnings of possible topping was as close as I have seen to calling it.

Not quite tech/a. There were quite a few non lagging cycles projections that warned of this from as far as 2 months ago. Although EW has been quite handy, most EW analysts were not as close to the mark as for example Magdoran and few others....

EW and or Vol Analysis on its own is sometimes is not enough......

 

[Sean K]

A couple of guys were picking a pullback on the XAO analysis thread from about 7 Jan, citing the divergence of the RSI and MACD from the chart. Also, the movement away from the 200d ma was a signal of a correction to be due.

I must note, a 'correction' as has been bandied about is not a 3% blip. A 'correction' is about 8%. We've got some room to move yet.

https://www.aussiestockforums.com/forums/showthread.php?t=4888&page=3

 

[>Apocalypto<]

Holes.

Yeh.
The technical information from that or most charts I have seen gave no indication of a spike move down.
From your charts nothing more than a standard corrective move in a solid trend.
To try and present a case after the fact is pointless.
The only analysis that came close were those using Elliot and Volume analysis.
Warnings of possible topping was as close as I have seen to calling it.

Now a warning is enough to place shortterm traders atleast in a position of caution.Smaller positions and looking for shorts in weaker stocks.

Longterm holders could have taken "some " profits from stocks held over 12 mths (Tax implications).

Weak low volume rallies back into the fall will show weakness.
Watch for selling into rallies---this will be big holders selling off some longs.
(Best seen on 10-20 min charts).

Ill be watching today to see if this is occuring here.

its all good for you to say holes but were is your analysis? How can any one predict a massive spike down you can't you can only get an idea of weakness to take defensive action, so I would love you to give us all your lead up to what happened yesterday T/A and show us how it is done!

 

[ducati916]

For an interesting indicator check out the blog.

jog on
d998