This may be a stupid question but I am going to ask it anyway, when setting a particular Trading System for example you have your Time Frame, Moving Averages, then possibly 1 or 2 lower indicators, here is where my question lies, on most of the lower indicators I use for example RSI (10) applied to the median price (H+L/2) ok this I can set up just fine but then I have the option of Simple, Wilders, Exponential, Weighted, Hull which my Charting seems to default to Wilders. I have been changing that to Simple, but playing with these different settings at the same point in time the numbers change quite a bit, so when setting up different types of trading systems and this info is not given which is the best one to use?
Its taken for granted by many writers on TA and by many traders, that through digesting historic data, indicators predict future price action. This is inherently impossible and not even necessary.
The point here is not to be right but to be profitable.
So its perfectly rational to use a strategy that incorporates an indicator which you simply use as the basis for your trade decisions, not as price predictions. Any indicator - any period, any type, any speed - as long as statistically it positively informs your trade decisions in your strategy.
Indicators are not traffic lights, where green means go and red means stop. They’re road signs that say this way to X and that way to Y: what’s important is to know whether you want to go to X or if you want to go to Y.
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Thank you for responding to my post, yep I hear you, another newbie getting lost in an overwhelming amount of technical analysis. I have read several of your responses on here and value your input, again Thank You.
Trade to trade well……………. Trade on!!!
Indicators.
The purpose of any technical indicator is purely for quick reference of an idea.
An indicator is not supposed to be used as a buy or sell signal.
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Since all those indicators are derivatives of historical price action, you should be able to know what the RSI(10) chart looks like just by looking at price action of the last 10 periods.