2009.03.09 INDICATORS

[TheRumpledOne]

2009.03.09 INDICATORS


Found the following post HERE

H. Rearden
Everything is relative

Member Since Feb 2009
83 Posts

Next topic.

Now, my personal take on indicators is this: don't use them, if they have nothing to do with the basic concept of your strategy. That means for example if you trade BO's, which require the price to break a certain level, there is no need to use indicators that display areas of overbuying or overselling. Moving averages in the same context are not useful either because what would be the point in having an 'average' of let's say the last 50 bars measured when you are only interested in the next 2 or 3 bars for your trade. The problem with most indicators is that any signal needs to be interpreted in the context of current price movements and that different indicators can give (not wrong in themselves) but conflicting signals in their combination.

The price itself is the main aspect to orientate on - any indicator should be secondary - and always look and ask where the price is first.

If you want to make use of indicators, it is always a good idea to check out their ingredients - what are the calculations based on? In one of my two own approaches, I am looking for for new high's (low's) - therefore, an indicator like stochastics 'indicates' areas where it has calculated overbuying (overselling) levels. Ultimately, I take the trade based on a real high or low since the indicator will at times show overbought/oversold levels while the price is still in a range - basically a false signal. When the signal of the indicator and the price show the same, and on more than one time frame, then it is usually time to act. So, make sure if you want to use the help of indicators, you pick them in accordance with the concept of your strategy and moreover, know what the calculation base is for what the indicator shows a signal.

H. Rearden

[prochargedmopar]

Looks like I need to scale back. Pick one or two and roll. Difficulty for me is I do not yet know what type of trader I will morph into.
3 pips
25 pips
100+ pips
Hmmmmmmm.