Are indicators a waste

Trading Discussion
42

I was interested in clarifying what price action is. The reason I’d had enough of reading these different threads is because it mentions so many technical indicators which you may have been using in the past.

You have already shown us how to do it in the thread. And the indicator chart and price action chart have the same entry candlesticks. So indicators didnt lag much in your example.

Regardless, I’m happy I understand enough and I’ll read the rest from books. I agree with you that everyone should learn price action trading. And if the use of price action makes you consistently profitable then it can only be looked at as a good thing! Thank you.

43

I think you just said it - look good in hindsight.

I never use indicators, but want to state that they were never meant to be traded with FX or any other leveraged trading tool.

Divergences, or overbought oversold tools CAN work if your an investor who doesnt use leverage or require PERFECT market timing.

They are not good enough for the likes of us who use leverage. Simply not precise enough.

44

I think the word Price Action has become a bit of a marketing term in itself.

New traders need labels as to what they are doing and take some pride in it.

Some one told me not so long ago he was a supply demand trader, i had no idea what he was on about.

Then when he explained his method I realised he was just talking about buying at support, selling at resistance.

Im not one for indicators, but of course traders can mix up as many methods as they wish - thats what trading is all about.

I think the word Price Action is an unfortunate one - but it is what it is.

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45

What is it that makes you want to be so offensive to others whenever you simply don’t check things out for yourself???

If you look at the home pages of any ESMA regulated broker you will see that they are OBLIGED by the regulator to declare the percentage of their clients lose money. For example:

FXCM:
“CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70.24% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.”

OANDA
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

These are statements compiled by the brokers themselves, not by me! Go figure!

You may also like to consider that you are a guest on this thread like all the rest of us and we are all free to post our opinions. However it is a gross abuse of your invite to post here to insult others just because they are pointing out the deficiencies and inaccuracies in your claims.

It is also against the rules of this site and against all forms of forum etiquette and in fact is verging on the typical actions of trolling.

Typical PA traders who do not understand the basics of what they are doing will argue that PA is good because it is current price but indicators are bad because they are lagging - they do not even understand that historical data is essential in both approaches (which are different, but in other respects. Indeed, “lagging” is not only the source of relative analysis it is an integral part of TA in general.

Here is a chart for the PA trader who claims they are only dealing with “current price” It is clean, free of indicators, free of any “lagging” references, entirely naked:

2019-12-27 current price
2019-12-27 current price600×674 17.7 KB

Now please tell me:
a) which way price is going to go from here - and why?

b) where you will place your stop - and why?

c) where you will place your target - and why?

Here is another chart with some “sinful” lagging price history and indicator:

2019-12-27 UG 4H
2019-12-27 UG 4H1892×962 52.4 KB

Apart from continuing your emotional instability, this also shows that you do not even read what others write.

The deception that is being perpetuated here by the forum “messiahs” (who cannot stand their principles being challenged) is that indicators are bad because they are lagging. The truth is that "of course they are lagging" - and that is why they have been developed - to provide a why to compare where we are with where we have been. The other truth is that PA also uses lagging, historically deduced reference points in order to function. They have the same basis.

For example:

The ichimoku indicator uses previous highs and lows to produce a line that is extrapolated forward to the present for comparison with the current price movement.

PA will use previous highs and lows to produce a line that is extrapolated forward to the present for comparison with the current price movement.

The issue with indicators is not that they are lagging (which the deception of the PA so-called gurus), it is the fact that they are based on fixed mathematical formulas that are then curve-fitted to set their parameters - and then assumed that they will fit all market conditions. But markets are not homogeneous and the fixed formulas will never work in all conditions.

Neither is PA infallible and will fail from time to time as do all approaches. Whether one can produce consistent results is factor of managing one risks and equity as well as assessing the positive expectancy of our method -whatever elements it is based on.

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46

Good post John! :smiley:

Yes indeed, “Price Action” has inevitably become market hype and jargon used particularly by product sellers by playing on its sexiness rather than its real value (which indeed it does have) and by perpetuating deceptive understandings that other approaches are intrinsically wrong whilst ignoring the true reasons why retail traders still lose money whatever they try (as so many have confessed to here on BP).

PA gurus cannot even agree on what PA includes!!! Just like the religious factions in the world.

I fully agree with you that indicators in general are not ideally suited to forex, but not because of some phantom excuse that they are “lagging” - of course they are lagging -so it PA. In fact indicators can be considered_less_ lagging than PA because they even include the current price in their calculation.

As we all know, TA requires historic price history in order to provide an estimate of probability advantage concerning future direction, as well as determining justified levels for stops and targets (whether mental or physically placed). This is equally true of all TA approaches.

The key as to whether one approach is better than another lies in understanding just how the elements are compiled and what they are designed to tell us.

The key problem with indicators is that they are mathematically derived and tuned to fit a certain profile of price movement. Just like fixing your car accelerator to a set speed of 60 mph and assuming it will glide around all corners that it comes to - until the curve is too tight and we end up in the ditch.

But that is not to say that certain indicators may have some add-on value for certain trading approaches in certain circumstances. They problem is NOT simply that “all indicators are lagging”.

People who make such unfounded claims are doing a considerable disservice to Newbies eitgher through their own ignorance or by ulterior design and motives such as selling products (even when they claim otherwise).

As you rightly say:

Provided, that is, they fully understand what they are using, why they are using it, and what are its limitations.

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47

You keep sinking to lower and lower levels of nefarious behavior! First you flag my post as being offensive which automatically hides its contents so that others can’t easily catch you at your game, then you, once again, attempt to put words into my mouth by taking what I say out of context and try and obfuscate all of this in a long useless post.

Let me clarify what I quoted from your post above. Here it is:

:point_up_2: This is what I was questioning. Note the bolded part of the statement above.

Can you respond to this?

48

You still don’t understand what lagging means. I suggest you first figure that out and then read your post again and try not to feel too much shame. :smile:

Let me give you a hint. Considering historical price is not considered lagging. When something lags it lags relative to something else. That something else can therefore never be considered lagging since it cannot lag relative to itself.

49

True, in the example I’ve used the crudest and simplest form of PA which also gets better entries than indicators would, even if marginally better. There are other refined PA methods which allow for almost PIP perfect entries but it would take a lot of background information to explain those techniques and for that reason I did not introduce those methods since it was an introductory thread meant for newbies.

As I mentioned, I was in this move from the very top with merely a 3 pip drawdown. I had been waiting for price to reach there for days as per my PA analysis. One could not have made such an entry using indicators due to the lag.

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50

I use Price Action and hope im not emotionally unstable!!!

I dont like indicators but its not because they lag, its because on their own they dont give specific entry points.

They need to be combined with other tools, which begs the question why not just use the other tools?

I think there are probably alot of newbies who learn price action, and lose thats not because price action is bad - but because their new and still have all those psychology issues to deal with.

For the life of me i cannot understand why anyone would use SR but heh live and let live.

OR Elliot wave, but if people make money from these methods any good on them.

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51

OMG LOL. This is classic!!! I quoted it to preserve it for posterity. Can’t stop laughing! :rofl:

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52

No fear of that I think! You are a sensible person that is more than capable of carrying on a discussion without dissolving into childish tantrums whenever someone has a different opinion.

I thought it was really quite amusing at first reading some of the responses here - even quite flattering! But then I started to realise that the person concerned actually has some serious negative issues. So I just skip over those posts without reading them.

There have been several cases over the years that I have been here where new guys appear and in order to try and gain attention start snapping and yapping at other people’s heels like a little puppy. But this site is very well moderated and the moderators will usually show a toleration whilst it can be recognised that these people eventually lose interest and usually just move on.

The only sad thing is that sometimes they do not give up and the moderators end up closing the threads and spoil it for all the others that are genuinely interested in the topics - kind of selfish really, but, hey, it is just a forum, and if people get some kind of perverse pleasure out of such nonsense then that is ok with me.

As we have already shared, I also do not consider the “lagging” as a problem, rather it is there by design to provide the reference between where we are and where we have been. Just as PA needs a historic “significant point/value” also derived from price history.

But, personally, I think certain indicators can indeed provide very good specific entry points together with identifying justified stop levels. However, I do not find indicators at all the most useful way of determining target areas. Like many other more seasoned traders, I do not like any off-chart indicators, partly because I don’t find any add-on value and partly because I forget to look at them (because they offer nothing extra for me).

PA is also an interesting topic because, whereas novices need to analyse and draw all kinds of lines, when one has been watching charts for so long, it is immediately, almost intuitively, readable where the sweet spots/warning areas are.

Because maybe the “other tools” are also rather limited on their own? As you have said earlier what a trader uses is a personal issue but they should know what they are there for and why they need them, Jettison anything that has no add-on value.

It can be seen on a number of threads on BP which run a certain trading system, especially indicator-based systems, that they start off with a certain set of tools and whenever it fails, the immediate response is to bolt on yet another indicator to try and “patch up” the leak. I guess that is understandable, but is entirely the wrong approach.

Whatever method one is basing one’s trading on, there will always be winners and losers, that is trading. The answers are to ensure that the overall method offers a positive probability advantage whilst ensuring that the value of wins to losses is optimised by managing risk and equity - even before a trade is considered worth entering. Not by just adding on another tool!

There are definitely many PA Newbies who lose, that has already been established via the proven extremely high loser rate reported by brokers themselves. 70+% retail losers most certainly includes PA traders as well as others. And since many Newbies with limited capital have turned to off-shore brokers to gain access to high leverage rate, I am pretty sure the loser rate in those brokers is even higher if they were to publish their statistics!

And I also agree that it is not the fault of PA at all! I have written on posts so many times that losses are not the fault of the tools, but the inadequacy and inexperience of the users of those tools. This is an important area that Newbies really need to concentrate on and is one reason why using a demo account properly in order to gain experience and knowledge will really pay off in live trading.

There is little fundamental justification why tightly defined SR levels should be viable but I could mention a couple. Firstly, when global investment funds are seeking optimal returns then, when the investment is in a foreign currency, then there will be a zone where a certain exchange rate range will make investment worthwhile - and whenever we enter those areas there will be further investment opportunities opening up.

Equally, import/export businesses will know at what price goods will sell competitively in one country and this therefore determines at which exchange rate it is worth purchasing those goods from a supplier country.

This is one factor in the oil industry, where oil is primarily priced in USD. Therefore fluctuations in the USD value relative to the domestic currency has an impact on when oil is bought and how much.

However, although these kinds of underlying supply and demand issues may activate commercial transactions in certain exchange rate areas, it is the widespread effect of TA analysis that will tend to condense these areas into much narrower zones - which retail traders will even tend to reduce to a single line.

But as we have said before, the effect of trying to identify S/R levels on a chart, especially across multiple TF charts, will provide a series of lines and thereby raises the issue of how to decide which one is “working” whilst minimising the risk of a loss from a breakthrough (which of course happens) Some traders will use an indicator to help with this process.

Well exactly! I have no experience of Elliot Wave so I have no comment on that. But, as you say, if it “works” for people, then who are we to interfere.

I would add that, whilst I am replying to your specific comments, I am addressing readers in general here and certainly not “talking down” to you on such basics. I recognise in your comments and your own blog that you have already passed over the line into consistency. BP is a site designed for beginners and there are too few seasoned traders here offering from their own experience, so your comments are valuable. :+1:

Good chatting with you! :slightly_smiling_face:

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53

Bloody hell, how can a simple topic of are indicators a waste of time as they follow price become such a argumentative subject. If you use indicators and it works great and in the same breath if you use a bare chart and it works also great.

Not worth the fight ,

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54

:smile: I agree with that. I should have ignored certain posts. I was concerned about what the newbies might take away from this thread but perhaps I should credit them for their ability for better discernment than I have thus far.

Please accept my sincere apologies for my part in this long drawn out thread.

55

Chin up , new decade , new challenge

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56

@anon46773462
@QuadPip

Thank you both for your contributions to this forum. Your wealth of knowledge is of great value to both beginners as well as the more experienced members here.

Much respect to you both.

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57

Pity, but most indicators are just lagging BS which promoted by big sharks to eat small fis which is always late and have no idea what is going on on the market in every moment h. The only non-lagging tools are: pure price action combined with real volume action, but I know only one company which provide this data real-time conveniently aggregated and displayed in a readable way at mt4 terminal.

58

I actually think Babypips - although for newbies is like a therapy for experienced traders too.

Many of us have been through so much that its just good to get things off our chests.

And we vent all past frustrations at beginners and their methods because we too were like that.

They say when you teach, you actually are learning I know thats true for me.

Unfortunately because of socratic thinking, the scientific method or even ‘democracy’ many of us think the best way to debate is to just prove someone else wrong.

There are many times when i too have started writing some retort - but deleted it because all it did was try to reinforce my opinion rather than add to the debate in a healthy way.

You can see this with the way whole Brexit just became a shouting match between two factions (thank god my side won lol).

Ive spent a lot of time in the East where the good of the group takes precedent over individual opinions - this has drawbacks too - but it has influenced the way i debate.

The indicator - Price Action argument will forever rage, as it should - it is what makes a market.

If you think that debate is bad - what about all those competing views on the market itself? Wow.

Finally I try to stay away from specific threads on systems, traders old and new are too attached to them.

When I read what they are doing I just shake my head. Its often like they are baking a cake, just throwing everything in it.

When they start adding chillis, peppers and five spice powder into an Apple pie you want to say ‘stop that already’ but its useless. We are all married to our opinion.

As for the blog, its suffered a few growing pains - but very soon will be putting up some if my own strategies that I think newbies can very much make their own.

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59

I agree - lifes too short.

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60

Heh what about the Vix or the Trin? i know these are stock indicators but stocks are risk on markets, surely we could use a high Vix to short the Yen, and a low Vix to buy it?

Lol

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61

i believe indicators are just to help you take decision. but they are not holy grail. I have used naked chart for long time and just followed price action.

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