What's your favourite stock market indicator?

[tech/a]

i know what u mean, but im sure some of the above indicators gives more false signals than others. so all things being equal, why wouldn't u pick the one that has the least probability of errors?

How do you determine a false signal.
False relative to what?

The signal in itself will be correct.To make this clearer you need to know how and what makes up an indicator.Without knowing this its correct application is not going to happen.

Further as mentioned indicators are next to useless in shorter term analysis due to their composition-----derivatives of high,low,open,close,volume or if trading futures Open Interest.
So when you really get into Indicator construction you'll see that indicators are similar but different.

You really only need one and at a max 2.
Other than that you only need price action and if your serious about Volume look at Volume Spread analysis.

 

[wavepicker]

Look at the following first:

- Pattern of the Trend first(most important)
- Time Second
- Price Level

On occassion may add a simple MACD, purely for confirmation

 

[Trembling Hand]

i know what u mean, but im sure some of the above indicators gives more false signals than others. so all things being equal, why wouldn't u pick the one that has the least probability of errors?

Ok I will say it. You are wasting your time looking for an the BEST indicator.
There is none, They give far to few reliable, trade-able signals to be bothered with. What reliably works is price patterns. Support/Resistance/Trends/Higher Highs/Lower Lows/OHLC patterns etc.

Sure you can find times on charts when an indicator is signalling something and seems to work but its just not often enough and the good signals don't out-way the times that they give you false signals or lagging signals or to early.

Its the Price you trade not an indicator. Your trade is only good if its higher than you bought it (a price pattern) it is of no help to your account if you brought something and its lower but the RSI is over sold (Indicator pattern)

Has anyone who uses Indicators find they give them most of their signals?
People use them as add-on to price patterns. Spend your time looking for them.

 

[Timmy]

I was talking about intraday. You often see a Bar on a 1 min chart go from a change of trend possibility right up to the last 10 sec only to reverse and end up looking like a bad idea all of a sudden. Sucking more traders into the opposite direction of the trend. This example is of the SPI today at 10:22.

Thanks for this TH - appreciate all the chart examples and the benefit of your experience.

 

[julius]

Tech - do you use anything that represents volume or volume & price that fits in with the VSA? I've read about a few but never used any myself - I'm not really using any indicators at all at the moment.

 

[blaze87]

i was looking at
http://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:multicollinearity

using a indicator from each category and buy purely on the 'buy signals' on itself sounds like a mechanical system and it probably won't work

but if i compliment it with the breakout of important resistance and support when there's a huge increase in volume, won't that suppose to increase the chances of profit.

1 other question,
what do you guys think about the "payout' ( i forgotten the proper term for it)

payout= probability of success* range of success

so let's say this trade you have a 60% probability of success(which realistically speaking is not possible to gauge and quite possibly insanely wrong), would the range of success be totally random? Since applying a stop-loss would limit the downside, what's to determine the 'top'. this sounds like another type of those questions that have no questions, but i would always welcome opinions.

 

[Trembling Hand]

but if i compliment it with the breakout of important resistance and support when there's a huge increase in volume, won't that suppose to increase the chances of profit.

NO.

The indicator is giving you a lagging signal from the last 7, 14, 21 whatever bars, it will not tell you what is going to happen to the next 7, 14, 21 whatever bars.

 

[blaze87]

NO.

The indicator is giving you a lagging signal from the last 7, 14, 21 whatever bars, it will not tell you what is going to happen to the next 7, 14, 21 whatever bars.

man, im really confused. so exactly how do you trade? you mentioned price patterns, but when i try to incorporate price patterns with the indicators as an add-on, u just shut it down like nothing.. that's why i need a mentor to guide me, i dun understand stuff, but i want to(without learning the hard way)

 

[chops_a_must]

that's why i need a mentor to guide me, i dun understand stuff, but i want to(without learning the hard way)

If you rely on indicators, you will learn the hard way.

I use pivots and gaps for trading futures, which aren't indicators. I use the ATR to set stops on stocks and futures, but only to determine if I should take scalp trades at certain times. i.e. it's the only time where if an indicator is above a certain level, I will take the trade. Otherwise it has no influence on the trades in which I take, or the criteria for which I take them.

I use 1 minute bars for futures entries, but don't enter until a new bar, for the reasons TH pointed out.

I use bollinger bands when thumbing through stock charts to assess potential breakouts. But if I had the time, and on stocks I know well, I don't need them. It tells me what I already know.

You can use MA's for long term trends, but, eventually you learn to know what the indicators are saying without even having to look at them anyway.

 

[tech/a]

Julius.

Volume Spread Analysis is analysis of the Range and the volume of a bar and in many cases that of preceeding and also future bars.

Within Tradeguider software there are custom indicators which will be similar in structure to the Garden Variety we can all get our hands on.
Their application is a little different and can be altered by the practitioner.
I know one is a parabolic.

The Alerts are pattern and volume based.

The only thing I use as "Confirmation" is timeframe (If we are talking VSA) and for timing Elliot.Both Entry (Wait for the trade to come to you) and Exit.
Again these are based upon confluence of timeframe.So I use confirming softwares whach have confirming analysis tools.
Both beyond the Garden Variety being discussed here.

When I get my computer back from the Doctors and I re load the myriad of software back on I'm happy to show an example.

I did one with a short play on the CVN thread that I remember.

Also put up a few on the Shorting thread.

Blaze

As for mentors you'll need to pay the best ones.

 

[tech/a]

Lets go a little further.

Technical analysis is pretty useless without knowing HOW to apply it.
You need to know what you want to get from the tool and most importantly HOW the tool should be applied.

Lets take CHOPS Bollinger Bands.
This is simply a displaced 20 day M/A of the selected Data Array H,L,or Close.

Chops use for finding potential breakouts is valid.
However what they wont tell you when a breakout in EITHER direction occurs is whether its likely to be successful.
Other analysis can help immensley.Infact within 3 bars I'm generally able to get it pretty right one way or the other.

If I then narrow down the timeframe and look inside the breakout bar I can also tell if the initial bar is a true impulse bar.
Here is a recient example of a trend reversal.
The Stock is RIV and the analysis done back at the high.
This is my personal VSA comments.



Tradeguider confirmed and you can look up the rest.



It reversed as expected then made a new high.
It then fell like a stone.
I didnt place the other analysis up for public view but was certainly there on the charts.

Hope this serves as an example of some short term analysis.

People might also be interested in how SBM performed after this analysis.
Here Elliot is used.
The Software is Advanced Get.

 

[chops_a_must]

Lets take CHOPS Bollinger Bands.
This is simply a displaced 20 day M/A of the selected Data Array H,L,or Close.

Chops use for finding potential breakouts is valid.
However what they wont tell you when a breakout in EITHER direction occurs is whether its likely to be successful.
Other analysis can help immensley.Infact within 3 bars I'm generally able to get it pretty right one way or the other.

That's correct. If they look promising, to the watchlist they go. And that's all the bands are for.

However, one doesn't know what way they will break. Obviously you can have a bias due to various reasons, but you can't enter a trade until it has broken out either way, because you could be waiting some time for it to move.

 

[hangseng]

Long to medium term trend analysis I just love MMA (Multiple Moving Averages), I just use the time frame I am looking for. MMA is simply using multiple moving averages from short term to long term in banded groups. I band 3 MA's together from 6 days (6,10,15) through to 250 days (180, 220, 250). Saved my backside 2/1/08, just as well I was actually watching over the previous 2 weeks on a daily basis.

Intraday though MMA is little use I have found, for this I use 'KISS'. Simple volume and price using candles and trend over various intraday time frames ranging from 1min - 1hr with 1-5min my favoured on forex for scalping.

On the MMA it has been effective for trend confirmation especially when used with volume. using MMA I chose to remove myself from the market beginning 27/12/07, I was completely out by the 3/1/08. Why? Between the 21/12 and the 2/1 the XJO rose on very low volume and the 3/1 the XJo fell on an increasing volume and the MMA's were crossing downward again for the 3rd time (3 strikes I'm out) creating the lower RH shoulder of the H&S pattern from the 2/11/06 to the 3/1/08 by the 7/1/08 the MMA's were opening up downward and the sell off was beginning on an increasing volume.

Still haven't used this to perfection on all occasions but it worked in Dec/Jan for me again. This time it saved me a lot of profit. The best indicator on the day I sold though was a tight feeling in my gut telling me something was not right as I watched regular small BOT orders across a range of quality stocks and large parcel sell orders going through on spec stocks beginning from the opening of trades and just continuing all day. This is history now as it continued for the next 3 weeks.

With the LT MMA chart 9botom chart) when the flame is burning brightly at the top of the trend line with a green tinge on top you have a major uptrend continuation. When the flame goes out, get out. When the flame is below the blue water line you are suffering from major 3rd degree burns at least or drowning may have already happened.

 

[motorway]

demand and supply

motorway

 

[hangseng]

demand and supply

motorway

truly the best indicator.

 

[Lucky_Country]

Green days and share price increases !

 

[nizar]

Pure price action.

 

[howardbandy]

Greetings all --

If you are looking for an indicator to be used to either enter or exit a trade, this technique will give a quick and dirty estimate of the indicator's accuracy. Note that the indicator can be anything -- a price pattern, a moving average crossover, a level of a stochastic being hit, a day of the month -- anything.

To test the entry accuracy for a long position:

Buy = your indicator;
Sell = BarsSince(Buy)>=2;

Change the 2 in the above to whatever is meaningful for you.

Swing traders who hold positions for a few days look for entries that show profit immediately. Longer term traders might not be concerned about profitability in just two days, but the entry should take the position in advance of a price rise in whatever time period you are using.

If an entry is too early, it is always easy to delay it. If the entry is too late, it might be possible to make it earlier by changing the values of the parameters (if it uses parameters).

It is often interesting to compare any entry being considered with a random entry.

Thanks,
Howard

 

[wayneL]

Jim Cramer.

Just fade him, you'll be rich.

Shane Oliver is good too.

 

[wayneL]

Hindsight.