Which indicators do you choose?

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.

- 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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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.

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.

tech/a said:

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

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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.

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.

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.

Click to expand...

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.

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.

Click to expand...

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

Pursuit more correct.

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

tech/a said:

Pursuit more correct.

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

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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

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.

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).
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.

Click to expand...

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!

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!

Click to expand...

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.

pavilion103 said:

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.

Click to expand...

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

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).
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.

Click to expand...

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 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.

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----

Click to expand...

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

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 ....)
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

Click to expand...

Thanks Motorway. Important to consider.

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

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