Simple question , are indicators a waste of time , I ask because if indicators such as the favourite waste of time RSI are lagging and follow price what real use do they serve.
The rule book states RSI etc oversold = Buy overbought = sell , yet the market continues in the same direction stopping you out. I see that there are loads of sharletons selling course that basically can never win yet people still buy. ie the simply ema cross system that looks great in hindsight but never in the moment or the bollie band bounce from one side to the other which never seem profitable
Has anyone ever had any success with indicators and did you use the standard or modified settings , I ask as could never seem to make anything from the RSI , MACD or ADX of this world when trying to day trade
Having conviction is probably the first step to back testing and developing a system. Depending on what books you have read will affect your mindset. The books I read convinced me indicators can work. Therefore I worked with them until I found a way to use them. If you never truly believe they work then they’re unlikely to ever help you as you will always see the negative side.
The thing you should remember is a lot of indicators were made for stock trading where overbought and oversold make sense. In forex it’s very hard to truly know what’s overbought or oversold as it would take a lot of fundamental analysis.
Any indicators I use are the standard setting. In my mind, I want people to see what I am seeing as they are more likely to make the same decision as me and therefore I would be on the right side with the market. Its not 100% but with good money management and discipline you can be profitable. Keep at it!
I wouldn’t say that indicators are a waste of time but most of them certainly do lag. Because of the lag you can only carve out a small portion of the market and with greater risk. If, on the other hand, you learn to read the naked chart you will be able to trade with much greater precision and with significantly lower risk. The better you can read price charts the higher your win rate and R:R will get.
They work at some point, what I found that truly works 70-90% of the time is price action. With price action you trade the obvious. Meaning, you trade the resistance and support together with candle pattern. Knowing candle patterns and able to spot them on the chart improved my trading.
Most lagging indicators have their place if you have built a strategy around them on a longer time frame.
Personally the only indicators I use are Momentum and Volume.
Momentum to try and ascertain the conviction of buyers or sellers and volume as like momentum gives you an indication of the strength and conviction of buyers and sellers.
Not a fan of indicators because my main trigger points for actions are located within price action I am directly looking at without getting distracted by information on another window or overlaid on price information, I am much more efficient in the decision making process and will potentially react quicker to changing market conditions
Trading with or without indicators is a highly personal decision and depends almost entirely on the trader’s own circumstances, risk appetite, experience and comfort level.
It is impossible to categorize either approach as categorically good or bad, but depending on your situation, choosing one over the other may contribute majorly in determining your success as a trader.
If you are using all indicators like the “rule book” says it might be a waste of time. But what if there are 20+ ways to use RSI different from the one you’ve mentioned? What are the chances that at least one of them won’t be a waste of time?
Dont simply sell overbough or oversold, that only works for ranges and if price is at resistance or support… If the market is trending, rsi will stay at extreme levels for a long time…
For trends you only buy an oversold rsi if price retraced to support on an uptrend, and vice versa.
Firstly, an oversold/overbought signal is not an invitation to take a position in the opposite direction. It is only an indication that price is getting ahead of itself compared with its normal rate of progress and that it may be wise to close/take some profit/ or at least anticipate a retracement. Certainly, a more aggressive move would be to take a trade in the opposite direction but one should be aware of the risk of a strong rebound back into the underlying trend direction and should look for other signs that maybe the overall market activity is ranging before taking such a position.
Secondly, the term “lagging” is an unfortunate and very misleading term. It is nothing to do with “lagging”. If we are trading TA rather than fundamentals, then whatever way we trade we are comparing current price with earlier price. If I say to you that the current price of instrument “XYZ” is 123.654, what does that tell you? Nothing! Without knowing where we have been and where we are now then there is no way to project a probability of where we might go next.
The core problem with indicators is not that they are “lagging”. It is because they are based on mathematical formulas that will only give similar answers when the market moves in similar ways - which, of course it does not constantly do!
For example, many trends/moves will build slowly over a prolonged period of time but finish with a sudden reversal over a few time periods. Whereas other moves may start with a sudden spurt and then consolidated for a long period. It is therefore senseless to expect a mathematical formula to work in the same fashion in all types of markets. Indicators are not useless but they only work in the market conditions for which they are designed, for the purposes for which they are designed, and with the parameters they are set up with.
I have never understood why, for some reason, traders talk about indicators or Price Action. There is no “one or the other”. They are all measures of relative positioning between “now and then”. And it simply a matter to finding what works for us according to what kind of trading we are intending to do. It may be a mixture of trendlines and S/R from higher TFs, mixed with an MA or two and a OS/OB indicator. Or it might just be a plain chart with an eye on previous extensions up and down and reading market pressures from candle patterns, etc.
Whatever we use, we need to understand just what it is telling us about what the market price movement is actually doing now, compared with what it has done previously and then projecting what it is most likely to do next.
Then we can decide how far we think it might go in the projected direction and where it needs to reverse to in order to decide we are wrong. Apply your risk/money management to these two extremes and decide if the trade makes sense.
If the probability analysis based on our TA gives a positive expectancy and the reward potential makes sense relative to the loss risk, then we are in business. If any of these factors are muddled then we wait for another trade.
But if you use indicators, learn what their formulas are and how they function with respect to price movement and interpret their readings accordingly.
That’s because indicators lag (for the most part). Indicators categorized as oscillators can predict the near term future through divergence but these signals are not always reliable. Indicators are derived from price and as such they mostly show you what has occurred. One cannot derive future price movement using indicators.
PA, on the other hand, is the analysis of price itself and can be utilized to predict market moves with a high degree of accuracy and consistency.
Whatever approach one uses it is based on a relative assessment of where price has been and where it is now in order to form an assessment of where it might go next.
If we only have the present price of, say, 35.46 with no other info of where it has been it is impossible to say where it might go next.
My point is that one does not have to belong to one camp or another. Some indicators are helpful because they analyse past data, some aspects of PA are useful because they highlight relative positioning, etc.
A trader needs to know what he needs to know and then define what tools from all that are available will provide that knowledge.
Whether you talk PA or indicators you are talking both past and present but not the future. The future always remains probability never a certainty.
Once you understand how to conduct PA analysis and you gain a certain level of proficiency then indicators become superfluous and even a hindrance to your ability to analyze the market. So from that viewpoint you land in one camp or the other. There might be a transitory period, as you’re acquiring knowledge in PA analysis, where you might use both but once you achieve a certain level of mastery over PA analysis then you cross over to the PA side of things.
Predicting future price levels will always be based on probabilities but only PA allows you to make those predictions accurately and consistently. The advantages of being in the PA camp as opposed to the indicator camp is huge and can affect your trading success significantly.
The ability to read the naked chart is invaluable and I would always encourage all traders to develop this skill.
That may be your way and that is fine. But others find value in indicators that is not present in so-called PA - which by the way is interpreted in many different ways by various traders.
The bottom line is use what provides you with what you want in order to trade the way you want.
There is absolutely no need to define, or belong to, any particular “camp”… there is no such thing. It is just market hype.
Almost every trading course or book or strategy incorporates off-chart indicators as the essential “trigger” or “filter” element. These are put to new traders as essential integral components, not optional extras.
It is a little bizarre but understandable that new traders start with a more complicated system than they eventually move to.
Of course, me being me I’m going to say that it is a deliberate strategy on the part of trainers, authors etc. to push new traders into slow losses - that way, they stay in the game but remain hungry for more information, improved indicators, more advanced strategies etc. Great business if you can get it…
You may think that and i am happy that you have found something that works for you - but not necessarily for everyone else!
But the huge numbers of newbies that come here professing to be PA traders - and then just disappear, together with the fact that over 70% of ALL traders with most ESMA regulated brokers lose money rather undermines your optimism that PA is only way!
Hi @tommor,
I suspect the main reason is they are feeding a desire amongst newcomers to find something that simply works and all they need do is plug it in and switch on and watch the money roll in.
Like cars, noone nowadays wants or needs to know what goes on under the hood. And people seek a similar approach in their trading systems.
So the more jingly bits contained in the package the better “value for money” the buyer is getting! I mean who is going to buy a package of they have to then work out for themselves how it functions (or not).
I have seen some real nightmare screenshots posted on this site alone that honestly hurt my eyes to even glance at, let alone try and understand what the 4/5 separate windows are supposedly telling the observer!
I have heard many traders here say how they have jettisoned various add-ons as they have progressed but i don’t recall anyone ever saying they have added anything once they have reached consistency.
But i remain convinced that consistency is a matter of what is between the ears and not what one draws on one’s charts - whatever label we try to give it!
PA is not proprietary to me. If it works for me then there is no reason that it will not also work for others. But as with any other form of analysis one needs to study it and practice it until one achieves proficiency.
I never said that PA is the only way. As for the rest of the paragraph; what sort of illogical drivel is this? I’m not going to respond to any crap you throw up here. If your argument has no merit it does not mean you start pouring nonsense in its place. Perhaps that’s the reason that people stop interacting in the forums - because of people like you who put words in their mount and spew out rubbish.
Understanding depends on the limitations of the intellect of the recipient as much as the accuracy of what is written. As well as the desire to understand.
For some people, the need to be right in spite of the evidence against them leads them to degrade a debate to personal attack when they run out of concrete evidence.
Your above post is self-explanatory where you stand.