If you’ve been trading for awhile, like me you have probably run the gamut of technical indicators and now what seems to be in vogue is a stripped down chart using price action and very few if any indicators.
With price-based indicators there are thousands to choose from and you’ve probably been thinking to yourself if I could just find the right one I’ll get rich trading. So you put on an MACD, followed by a stochastic, a momentum indicator, and an RSI. The only problem is that all of these tools are essentially looking at the same thing using different, but similar formulas to turn the raw price data into a visual representation.
Price is reactive, meaning that by definition in order to get a signal something has to happen in the price so whether you are using indicators or pure price action it’s still lagging.
Don’t get me wrong I think price is useful for confirmation, but it wasn’t until I started using predictive analysis that I started seeing a change in my trading results.
So what am I talking about when I say Predictive Forex Indicators? These are some of the things I’ve studied over the years that I believe actually work.
-Volume Spread Analysis (by Richard Wycoff)
-Time Based Analysis
-Cycle Analysis
-Seasonal Analysis
-Market Astrophysics
-Bank Manipulation
-Support/Resistance Confluence Levels
The difference is that by using these types of tools you can plan your trades and your day out beforehand. You are not stuck to your trading monitors waiting for something to happen. Any thoughts, comments questions? Has anybody used any of these tools are any other predictive indicators not listed here?
I love having this debate (in regard to indicators).
The key thing you’re mentioning is the semantic aspect of the term indicator and how a signal is generated.
Indeed, the only way a momentum indicator can ‘move’ is after price has already moved- there’s no arguing that.
What can be argued though, is the knee-jerk use of the term lagging when describing an indicator, and the closing of the book on any discussion thereafter. Because, I’ll always argue that the specific indicator I employ may be lagging in definition and origin, but, is foreword looking in terms of application.
A divergence in momentum via a stochastic indicator could potentially signal a reversal, and is far from lagging in mere application. Coupled with basic price action (environment, recognizable patterns, candlesticks) and supply/demand analysis you have a powerful method to enter and exit the markets which can weather almost any type of market dynamic.
ForexUnlimited I think that you are completely missing the point of my post. It’s not to argue whether price based indicators or price action is useful or not. They certainly are and I use them as well both volume and stochastic divergence for trade entries. My point is simply that they are not the whole picture.
A good analogy would be driving to an unfamiliar destination using only road signs. Sure you can get there, but you are likely to make lots of mistakes along the way, and maybe get lost.
However if you add predictive indicators into the mix then it’s like using a semi-broken GPS ( to be fair we’re only ever talking probabilities in trading).
As an example, I am currently watching the Pound Yen. As of Friday May 9th it completed a cycle down. However both of my seasonal indicators say that the trend is down. My technical indies are also saying bearish. However since the down cycle is complete I need to watch for a pull back and my cycle analysis says that it is likely to be around 90-100 pips. This would put the pair around the 172.25-172.35 level, which is where the 1 hr. 200 MA is and the daily pivot as well as some other resistance points, or supply zones I look at meet. My time analysis says that the turn will likely come around 3:30 pm to 4:30 (GMT+7) on Tuesday afternoon May 13th, and will likely hold it until 1:30 am. So I’ll start looking at 2:30 pm that’s when I’ll look at the volume spread analysis, bank manipulation and price indicators to see whether they are saying down or not. If they do then I’ve got a low risk high reward trade with.
Again I am using a set of non-correlated indicators
-Price
-Time
-Volume Spread
-Support/Resistance
-Bank manipulation
-Cycle
-Seasonals
And waiting until they are all telling me the same thing.
Will it definitely play out this way? No of course not. It could just tank, and never look back, or it could blast up through 172.25 and never turn. But if it does reach that area, and it’s Tuesday at around 3:30 pm and my tech indies and VSA is saying down, I’m taking the trade.
This is the difference between planning a trade and just reacting or following the price. I now have the time and energy to analyze other pairs, go out to lunch, walk the dog or go surfing without being tethered to the screen. If you analyze 3 or 4 pairs this way one of them will usually play out and if you just get 1 or 2 of these trades a week you’ve got a good lifestyle.
Again I’m not trying to argue with anyone or tell anybody that they’re wrong. I just wish someone had taught me this stuff it would have saved me years of frustration.
I think everyone would agree with that.:17: I think as your learning goes up, your frustration goes down but it would be nice if it happened sooner that what feels like forever later
Guess only [I]specific[/I] thoughts / comments /questions were allowed. Should have specified that, rather than saying “Any thoughts”- that led me to believe I can provide anything.
I don’t think OP was dismissing your post, it looked like he was actually agreeing with you as to their importance, he was just adding his take on including predictive and sentiment analysis in your decission. I use VSA and trader sentiment in my analysis as well as tech and other fundamental analysis. I would no more use either of them by themselves than I would use a 200 SMA by itself. IMO you need to draw from Tech, Fund and sentiment analysis to get complete picture, to make an informed decision.
His use of traders sentiment will workout out like any other trade that goes against the trend; genius when it works and foolish when it doesn’t.
GP is right I didn’t mean to be dismissive and I am agreeing with you that divergence is useful, but in the right context. It’s just that most of what I see that’s being taught today either focuses on technical indicators or now what’s in vogue is pure price action and support and resistance. But this misses the underlying structure of the markets. If you understand this it makes it easier to plan trades.
If you look my prediction about the GY reversing to the upside was correct. However it has extended beyond the 100 pip level that I called by about 30 pips. This indicates to me that the cycle is over extended and that there has been a shift in the trend, at least temporarily, which means that it will likely run about another 50-100 pips before it turns.
