Indicators... The Beautiful Lie
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Thread: Indicators... The Beautiful Lie

  1. #1
    This is a debate concerning why indiors are totally unworthy.
    Allow me to begin with this....

    In an uncertain environment your mind gravitates and clings to anything that can give meaning to what is going on. Indiors fill this job perfectly. Exactly like reading your horoscope, YOU make it fit in your analysis. There are countless configurations and time frames and indiors to select from, one (probably many) will alway back up your argument. The issue is when it works we find comfort in that reality, and as soon as it doesn't we forget about it. We do so because we wish to believe that they operate, since deep down we expect that its true and they can make us wealthy.... People have the propensity to regard all things great as their own doing and all things awful to some external cause. This is just human nature, and it works nicely for indiors. Yes I left money, my indiors are superb, or Damn I lost, perhaps I need to adjust the settings. The truth is the more I know the more I see nobody knows what going to happen, it's just money management and your own plogy that will make or break you. With all the intelligent people out there don't you think someone will have invented the perfect indior, and be sitting on the beach watching the money role in. To date I've yet to hear of something like this, and I am confident I'll never hear it. These indiors are just tools that improve market liquidity... consider it.... With all the various indiors and setting, there will always be a sign going off. This makes sure that banks and those with clout can off load their rankings into the unsuspecting audience. And, even if banks utilize indiors it's only to see what everyone else might be thinking.

    So indiors are

    1) slow
    2) and therefore impede your performance
    3) Self validating due to infinite arrangements
    4) Give you confidence when you should not have some
    5) Help you become sucker

    Ps. I am aware there will be discussion about the market being fractal... that this is just another way to validate indiors.

  2. #2
    Ragging on indiors is stylish and trendy. It is the thing to do. However, in the correct context indiors can be rather beneficial.

    The initial chart. This is the pound during the last several days. I've got a couple of indies on it, fibs, weekly and daily pivot, macd.

    A few things to note. Notice how the fibs are very good at predicting the HS range and it's breakout. Notice how the daily pivot has a nice pullback (sell point, anyone?) That corresponds to a fib.

    Also see the MACD. At a downtrend it pulls (emphasized ) to the line. Another sell point. Clearly you need to know that you're trending in order to utilize it, of course you can not use it in a range, however if all you're looking for is a possible entry point... or a heads-up on when the trend changes (crosses then pulls back), it works wonders.

    Then the 2nd chart. That is today's EURGBP. Notice pull and it's accuracy at predicting areas. Also observe the double top formation, how the MACD's 2nd top is reduced. That indies less momentum on the 2nd top, and alludes to a strong potential drop on the EURGBP. It's already started infact if you go to the H1. Using the advice above you can wait for price to cross, then pull back to the MACD 0 line, then go brief. If you need more confirmation then await all that to occur AT a fib retracement level because fib breakouts tend to have a small pullback.

    yes, indiors... if correctly used, work great. The issue is most people just throw them on a chart w/o learning how to use them, and then they get mad when ranging behaviour eats them up. It is all about context.

  3. #3
    You have half the story correct, endlessly permuting indiors to match historical data is useless. But in the event that you truly know what market effect you are attempting to measure, indiors can be helpful.

  4. #4

    Do you care to elaborate, I am eager to hear what you have to say...

  5. #5
    Let me offer an example, lets say you were trading a spread, it would be perfectly legitimate to utilize standard deviation bands to measure deviation from the mean (I can't think of another means of doing this ). Another illustration is volatility stops using the ATR indior, nothing wrong with that.

    Indiors as in themselves are not useless, they just measure something. Random appliion of indiors (as usually viewed here) is futile, you've got to have an effect which you would like to measure, you do not find effects simply by tweaking indiors, this is simply inducing the worst form of data mining bias conceivable.

  6. #6
    Quote Originally Posted by ;

    Would you care to elaborate, I am eager to hear what you need to say....
    Not going to speak for him personally, but I'd assume he means something like if you are expecting the market to exchange in a range, stochastic can get the job done nicely, or if you are anticipating a breakout, an indior like the ADX may be used for affirmation.

    Of course one doesn't an indior to exchange a rangebound market, or to exchange a breakout, but like he said, in case you understand what impact you are trying to measure then they can be helpful.

    I use moving averages on a few of my charts, never as signals (MA crossovers would be the worst'system' ever, but even they may be used profitably), but resources for confirming price action, as they can be a good aid in describing exactly what has gone on based on what it is you're trying to measure.

    Edit: seems like craig beat me

  7. #7
    Quote Originally Posted by ;
    You have half the story right, endlessly permuting indiors to fit historical data is useless. But if you actually know what market effect you are attempting to quantify, indiors could be useful.
    I agree with Craig. If you know the pupose of a specific indior and how to read it properly react to it, then indiors may be very helpful to a trader.

    For instance, lets take Price Action (Candles) indior out for a spin. Most traders are confounded by Candle Patterns and fundamental market motion. Watching candle formations, can be a VERY good indior into a trader and would help a trader expect the next move. Additionally, understanding general market movement, a trader could time their entries/exits almost into the pip. The market goes in Retracements. Whenever the trader accomplishes the concept of Retracements, trading can and will be a lot simple.

    Too many traders attempt SWING trading because the End-All to a specific trading style without realising the a number of other ways to trade the market. You will find Long-Only traders, Short-Only traders, Swing traders, Divergence-Only traders etc etc etc.. .

    A terrific indior, I use and has proven itself nicely, is Candle Retracements. Lets take a Long position for example. Watching the market, I see the market moving upwards with high/long candle power. As a trader, I would now seem to enter a SELL order in the high of the upwards move. As soon as a top was confirmed, I'd only trade the Retracement (which is a type of indior). Additionally, I could use a Fib Retracement (another indior) to allow me to gauge the retracement thickness, in doing so, would help me with a depart egy. Utilizing, Market SELL-ONLY Retracements, is just one of many examples how indiors could aid a trader in getting profitable.

  8. #8
    Quote Originally Posted by ;
    Allow me to provide an example, lets say you're trading a spread, it'd be perfectly valid to utilize standard deviation bands to measure deviation from the mean (I can not think of another means of doing it). Another example is volatility stops using the ATR indior, nothing wrong with this.

    Indiors as in themselves aren't useless, they simply measure something. Random appliion of indiors (as generally seen here) is futile, you've got to have an effect which you would like to measure, you don't find effects simply by tweaking indiors, this can be simply...
    Hi craig, nice article.

    I've one question, what is'trading a spread'?


  9. #9
    A spread is the difference between two markets (aka'pairs trading').

  10. #10
    lol. Dude, you're only as awful as all of the men and women who have charts full of indiors, lines, fibos, stations, rings, ma's, etc., you're taking an extreme in a circumstance where the answer lies in the center.

    Indiors are utilized wrongly by the majority of users. Many men and women use them as signal providers. If A crosses B, then sell sell sell!!!!!! Or if C gets over 2000, BUY BUY BUY!!!!!

    That's freakin ridiculous. Allowed, a few indiors are specifically constructed for signals (the majority of which end up dropping ) but that's not what indiors in general were constructed for. They were constructed for INDICATING fluctuations in price, patterns, deviations etc..

    They should be utilized as tools or confirmations, or even entrances and exits, but not buys and sells. Since I'm guessing that is what you've used them for, of course it did not work. And now, because you decided to attempt to take a short cut instead of really learning the market, you're pissed because you lost.

    Here's a summary of your post and my rebuttals (yours are in bold):

    So indiors are

    1) slow

    Obviously. They are based on data that was previous. So yes they're slow, but what exactly are you comparing them to? What is fast? you? your mind? If so, why can you use indiors ? Obviously you did not have sufficient confidence in yourself to trade blind, so you turned to indiors (that can be a fair thing for a relative newbie to do). So what's fast? What should you use now that is so much quicker than indiors? Basically, rate in this instance is immaterial.

    Two ) and consequently impede your operation

    Should you use them as signal providers, however fast they are they will impede your performance. Again, speed is immaterial if you realize that what on that chart which isn't the genuine current tick is past data and so slow.

    3) Self validating because of infinite arrangements

    lol what? Infinite arrangements of price? Data?lines and bars? Everything on that chart is self validating (requiring no external confimation). That's the whole poiunt of all indiors, to validtae that which you were already formerly thinking/seeing. But again, if you're using these for signals, then yes. They are self validating and therefore inconsistent or unreliable.

    4) Give you confidence when you shouldn't have some

    so you're saying that anyone in the market shouldn't have confidence. ok. That's the only thing I get from this statement, because you're basically saying that nobody should have confidence interval. interesting. I guess nobody can trade and it all is only the magic water sprites controlling the forces of nature that produce the price movement. nope.

    The whole point of indiors (once again, I feel like a broken record repeating myself) is to confirm what you were already thinking, or in other words, provide you confidence about your current perspective of the market.

    5) Assist you become a sucker

    I think you did this entirely on your own buddy. Whether you want it or not, indiors are bits of code, not just a tiny demon sitting on your shoulder , become a sucker! Turned into a sucker! lol. Whatever you did was entirely your own fault or your decision for being mislead.

    Simply because you did not use something right doesn't mean it's busted or a lie.

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