Which two indicators would you use?

[Sunder]

Hey peoples.

After 9 months of trying to actively trade instead of investing, and being mildly down on my capital, I figure that my methods so far are pretty much throw a dart at the dartboard and hope for the best. The only bright side I have is that I'm down less than the market overall - but not by much.

There are things I have learned, mostly to do with trading discipline, but I think my methodology needs a serious overhaul.

I first started using a 10 Day EMA as my "fast moving" indicator, and a 26/12/9 MACD as my slow moving indicator, and when both agreed, I went in. The theory was that having a fast and slow moving indicator means I could get most of the movement, but miss the volatile whipsaws.

Obviously, since they're both moving average based, I decided this was bad, and started playing around with RSI - 5 day and 14 day Wilder. However, my feel is that RSI is still a moving averages based indicator, just with a different formula.

So, my question is, if you were to use two indicators to signal and confirm, which two would you use?

My overall trading strategy is divide my capital into five, and spread them out across ASX CFDs, no two being in the same sector. At any time, one or more of those five parcels can be in cash rather than in a CFD, and positions can be long or short. Obviously a high risk investment strategy, but it's not my retirement money I'm playing with here. Just a spare 20k I have.

Thanks heaps for advice and input.

 

[IFocus]

Hey peoples.

After 9 months of trying to actively trade instead of investing, and being mildly down on my capital, I figure that my methods so far are pretty much throw a dart at the dartboard and hope for the best. The only bright side I have is that I'm down less than the market overall - but not by much.

There are things I have learned, mostly to do with trading discipline, but I think my methodology needs a serious overhaul.

I first started using a 10 Day EMA as my "fast moving" indicator, and a 26/12/9 MACD as my slow moving indicator, and when both agreed, I went in. The theory was that having a fast and slow moving indicator means I could get most of the movement, but miss the volatile whipsaws.

Obviously, since they're both moving average based, I decided this was bad, and started playing around with RSI - 5 day and 14 day Wilder. However, my feel is that RSI is still a moving averages based indicator, just with a different formula.

So, my question is, if you were to use two indicators to signal and confirm, which two would you use?

My overall trading strategy is divide my capital into five, and spread them out across ASX CFDs, no two being in the same sector. At any time, one or more of those five parcels can be in cash rather than in a CFD, and positions can be long or short. Obviously a high risk investment strategy, but it's not my retirement money I'm playing with here. Just a spare 20k I have.

Thanks heaps for advice and input.

1st question show us your test results..........that comes before trading, I know its boring and lacks the excitement and thrill of trading live.

Indicators are best for maybe showing market conditions i.e. trend up trend down, side ways maybe also for finding divergence, for entry exit they generally suck.

 

[Sunder]

Well, that's the thing, my "Test" results using live money, show me that I'm behind

So... If you're not using indicators them as entry/exit points, what are you using?

I'm combining with stop loss obviously, but most often, my stop losses are when the indicators turn, which mean they're usually fairly large.

 

[Whiskers]

So... If you're not using indicators them as entry/exit points, what are you using?

EW.

No, I use a number of indicators including EW lately.

But I'd say if you had to use two, they'd be the MACD and DMI.

I don't think it would help if I just spelt out all of what I use, because the way it works for me is from getting a good understanding of the indicators that suit my trading/investing style and gelling that with a bit of FA.

MACD and DMI can tell you a lot. I studied everything I could find about them until it became second nature, then progressed onto other indicators to compliment and fine tune them.

Also I presume you are only using daily charts. A couple or three different time frames can give a clearer picture, eg hourly, daily and weekly.

 

[skyQuake]

Don't use price based indicators. That's my recommendation anyway, I've wasted years on those. If a freely available public indicator can make u money, why isn't everyone making money off them? Changing parameters only serves to 'curve fit' for past results.
Also as a rule of thumbs, indicators lag price action. Why trade on old data? Can you base today's buying/selling on last week's data? Another problem with them is that they try to pick tops and bottoms (oscillators). You will get killed if the trend is strong (ie someting staying in oversold for months) or when its chopping (you get craploads of false breaks).
Learn to read price action, volume, few trendlines and maybe some other stuff. But imo, price based indicators as a group are a waste of time.

 

[mazzatelli1000]

Don't use price based indicators. That's my recommendation anyway, I've wasted years on those. If a freely available public indicator can make u money, why isn't everyone making money off them? Changing parameters only serves to 'curve fit' for past results.
Also as a rule of thumbs, indicators lag price action. Why trade on old data? Can you base today's buying/selling on last week's data? Another problem with them is that they try to pick tops and bottoms (oscillators). You will get killed if the trend is strong (ie someting staying in oversold for months) or when its chopping (you get craploads of false breaks).
Learn to read price action, volume, few trendlines and maybe some other stuff. But imo, price based indicators as a group are a waste of time.

I wouldn't go so far to do away with price based indicators. It is good to be aware and understand how they are derived, even though you may not use them exclusively to trade off.

Sunder, since you mentioned placing trades in different sectors - an understanding of intermarket and sector relationships may help as well.

 

[Sunder]

I wouldn't go so far to do away with price based indicators. It is good to be aware and understand how they are derived, even though you may not use them exclusively to trade off.

Sunder, since you mentioned placing trades in different sectors - an understanding of intermarket and sector relationships may help as well.

Thanks for the advice so far guys.

I don't think price based indicators are useless - every indicator is basically public now - why aren't people all making money off whatever it is that works if it's not price based? Sure price based ones are simpler, but that doesn't mean if there was another secret reliable method, people wouldn't all be flocking to that too... My guess is that the problem is people either

1. Are undiscipliend
2. Don't understanding what the indicators actually mean, and therefore mistrading them. For example, some people who I know who've dabbled in trading on EMAs, don't know how to adjust the time frame of an EMA calc if market starts ranging instead of trending.

With regards to the sector relationships, could you expand? Do you mean how Gold stocks usually go up when financial stocks go down and vice versa?

 

[posh]

i know people who make no use of indicators and do it better.

 

[sreenathc]

Hi,
I find that if there is a trend....either up or down, following Renko charts, it is possible to catch about 70-80% of the trend and make money....however, in a choppy market this will make you lose money in small bits many times!!

I find using divergences in Stochastic Oscillator and MACD seems to give a fairly good percentage of wins....

Cheers,
Sree

 

[cordelia]

Hey peoples.

After 9 months of trying to actively trade instead of investing, and being mildly down on my capital, I figure that my methods so far are pretty much throw a dart at the dartboard and hope for the best. The only bright side I have is that I'm down less than the market overall - but not by much.

There are things I have learned, mostly to do with trading discipline, but I think my methodology needs a serious overhaul.

I first started using a 10 Day EMA as my "fast moving" indicator, and a 26/12/9 MACD as my slow moving indicator, and when both agreed, I went in. The theory was that having a fast and slow moving indicator means I could get most of the movement, but miss the volatile whipsaws.

Obviously, since they're both moving average based, I decided this was bad, and started playing around with RSI - 5 day and 14 day Wilder. However, my feel is that RSI is still a moving averages based indicator, just with a different formula.

So, my question is, if you were to use two indicators to signal and confirm, which two would you use?

My overall trading strategy is divide my capital into five, and spread them out across ASX CFDs, no two being in the same sector. At any time, one or more of those five parcels can be in cash rather than in a CFD, and positions can be long or short. Obviously a high risk investment strategy, but it's not my retirement money I'm playing with here. Just a spare 20k I have.

Thanks heaps for advice and input.

well quite honestly you have probably picked the worst time to learn to do anything..Even experienced traders would be hard pressed to make a dollar in this market...

if you are inexperienced just sit on the side lines and watch..we are going through ahuge financial upheaval...Only a fool would sail a dingy into a hurricane..

 

[julius]

Hi Sunder,

If your method is that simple then it can be mechanically backtested.

If you want to understand what works and what doesn't, then this is your best bet.

Hey peoples.

After 9 months of trying to actively trade instead of investing, and being mildly down on my capital, I figure that my methods so far are pretty much throw a dart at the dartboard and hope for the best. The only bright side I have is that I'm down less than the market overall - but not by much.

There are things I have learned, mostly to do with trading discipline, but I think my methodology needs a serious overhaul.

I first started using a 10 Day EMA as my "fast moving" indicator, and a 26/12/9 MACD as my slow moving indicator, and when both agreed, I went in. The theory was that having a fast and slow moving indicator means I could get most of the movement, but miss the volatile whipsaws.

Obviously, since they're both moving average based, I decided this was bad, and started playing around with RSI - 5 day and 14 day Wilder. However, my feel is that RSI is still a moving averages based indicator, just with a different formula.

So, my question is, if you were to use two indicators to signal and confirm, which two would you use?

My overall trading strategy is divide my capital into five, and spread them out across ASX CFDs, no two being in the same sector. At any time, one or more of those five parcels can be in cash rather than in a CFD, and positions can be long or short. Obviously a high risk investment strategy, but it's not my retirement money I'm playing with here. Just a spare 20k I have.

Thanks heaps for advice and input.

 

[Sunder]

Hi,
I find that if there is a trend....either up or down, following Renko charts, it is possible to catch about 70-80% of the trend and make money....however, in a choppy market this will make you lose money in small bits many times!!

That's what my first set of indicators back tested did. You can see what it did to me when I tried it since about August 1. Whipsawed every 2-3 days, and no movement anyway. Death of a thousand cuts. $300 here, + trading fees. $300 there, + trading fees..

well quite honestly you have probably picked the worst time to learn to do anything..Even experienced traders would be hard pressed to make a dollar in this market...

I think I have, but at first I was insistent on staying in, as I knew if I could learn now, I could learn to trade any time. However, I am temporarily admitting defeat... Or maybe just regrouping in the corner, while I forward test this new strategy. I only have "Incredible Charts" as my stock picking software, along with some perl scripts I have written, so back testing on DMI is not possible, but I am intrigued, so I am forward testing on the ASX CFD simulator.

Does make me feel better though, that you say that it's a difficult time. I've heard some people say that this is the best time to make a quick buck. Best time to lose a quick buck too, I guess.

 

[IFocus]

Sunder I take it you are trading end of day

Well, that's the thing, my "Test" results using live money, show me that I'm behind

Being behind is not the problem that will come to haunt you. Testing using live money as you put it will almost certainly create the wrong behavoirs for trading, making profits comes from correct trading behavoirs.

Testing is the 1st step to creating correct trading behaviors.

So... If you're not using indicators them as entry/exit points, what are you using?

I trade with trends no trend no trade this is the basis for 90% of my trading method. There are many other nuances but this is the foundations.

Next I enter using price action that has formed a pattern that signals possible trend continuation again some nuances but the pattern must fit a money management criteria.

I'm combining with stop loss obviously, but most often, my stop losses are when the indicators turn, which mean they're usually fairly large.

Not good enough your stop loss position must be in combination with your money management criteria.

Start by reading Nick Rades book Adaptive Analysis

Professionals test because its not about the dream, excitement, passion etc its about business, punters gamble because of the dream, excitement, passion etc.

Hope this helps

 

[tech/a]

https://www.aussiestockforums.com/forums/showthread.php?t=12591

Shows the basis of some of my discretionary setup.
As for indicators.
Pattern (not Radges PPS)
Price
Volume

Then and most importantly letting the trade come to you.
In the case shown in the charts on the other thread above I was aware of the setup around a week before the trade came to me.

It is very simple yet we tend to make it as acomplex as possible---thinking that complexity MUST = accuracy.

 

[BBand]

Hi Sunder,
Don't give up - there's money to be made in the market when the conditions are correct.

Its not rocket science either!

Just understand that a particular setup that works when the market is trending will probably not work so well when it is not
If you want to be in the market all the time, then you have to have a setup for each type of market condition, and recognise when market conditions change

Depending on the timeframe used, a stock can be in an uptrend on one, downtrend on another and range trading on yet another - so you may have to use timeframe analysis to decide if or not to take a trade.

If you find a setup that you have "faith" in - remember that the setup will occur across ALL timeframes - the higher the timeframe used - the easier it is to trade (less noise, giving clearer signals), the lower the timeframe, the more "expert" you have to be to make use of it.

If you can't make money trading say a weekly chart - then don't even consider trading a lower timeframe.
It takes a lot of experience to be consistently profitable using a daily chart (anyone telling you differently is only kidding themselves)

Indicators work, EW works, pattern trading works, etc etc. Don't be put off by other peoples opinions - they are only opinions - as is this post
At the end of the day, indicators, EW etc are just tools, in the hands of a good tradesman.............

There is nothing wrong in trading from say the monthly or weekly charts!! - there is serious money to be made there for comparitively less work , and it gives you a life outside of trading
When market conditions become more favourable, I'll probably include trading from the monthly or weekly charts, easy to trade. Trading from the longer term charts is a much more relaxed style of trading, but still offers a very good potential return!!!

Longer timeframe trading cuts the stress/excitement level drastically and allows you to refine your setups without undue stress
Once you have refined your setups and gained trading experience - consider trading a lower time frame, you will have the opportunity of more trades to choose from, which ultimately should result in a larger $ return each year.

For what its worth, -----
I use both indicators and price/volume/time analysis - and indicators play a major role.

For me, the most important aspect of trading, from a TA point of view - is understanding the various forms of Support/Resistance and the use of multi timeframes

Be your own man - do not take anything you read or hear as gospel - check it out first

Hope this helps

 

[sreenathc]

In this choppy market, I am finding that 'gap' trading seems to work....here is what I am using ....

1. If a stock Gap's up....wait for Stochastic Oscillator to show divergence at top with price action and buy PUTS...at least 2 months away!!. Sell when gap is filled

2. If a gap down happens....same thing but in reverse.

I am trading a maximum of 2000/trade...and am happy making about 200/trade every 4 or 5 days.

I don't know how long this 'lucky' string of success will continue, because I think this is more luck than my 'financial' genius

Cheers.

P.S...Does anybody use Refined Elliott Trader software....when Rich Swannell explained, it seemed so simple...and yet when I trade using that, I lost money every time!! The predictions keep changing for the stock on a daily basis...so, I have no idea what we are supposed to do.

 

[Trembling Hand]

Volume and time (as well as price obviously). Do yourself a big favour and throw the rest out.:horse:

 

[IFocus]

In this choppy market, I am finding that 'gap' trading seems to work....here is what I am using ....

1. If a stock Gap's up....wait for Stochastic Oscillator to show divergence at top with price action and buy PUTS...at least 2 months away!!. Sell when gap is filled

2. If a gap down happens....same thing but in reverse.

I am trading a maximum of 2000/trade...and am happy making about 200/trade every 4 or 5 days.

I don't know how long this 'lucky' string of success will continue, because I think this is more luck than my 'financial' genius

Cheers.

P.S...Does anybody use Refined Elliott Trader software....when Rich Swannell explained, it seemed so simple...and yet when I trade using that, I lost money every time!! The predictions keep changing for the stock on a daily basis...so, I have no idea what we are supposed to do.

Google Rich Swannell


http://www.trade2win.com/boards/software/12206-refined-elliott-trader.html

 

[Trembling Hand]

Also as a rule of thumbs, indicators lag price action. Why trade on old data? Can you base today's buying/selling on last week's data? Another problem with them is that they try to pick tops and bottoms (oscillators). You will get killed if the trend is strong (ie someting staying in oversold for months) or when its chopping (you get craploads of false breaks).
Learn to read price action, volume, few trendlines and maybe some other stuff. But imo, price based indicators as a group are a waste of time.

:iagree:

 

[baboon]

I use 10EMA and 30EMA on the daily charts. If both are moving upwards and price is above both averages I try to buy. I dont buy when the moving averages are moving downwards and price is below averages. Its only the way I do it, but might not work for anyone else. I try my best to get out even or with a small loss but doesnt always work. Need more practice.

If I watch the market intraday I use the 5-minute chart with 10EMA and 30EMA as well. I read this strategy in a book and I liked it so I try to stick with it.