Registered User
Joined: 1/12/2009
Posts: 235
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I was just curious as to what other traders here use as far as indicators go? Do you use the Worden indicators as well or just the basics. Just interested in what fellow traders use. Thanks.
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Registered User
Joined: 12/18/2008
Posts: 150
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as a professional trader, i can tell you that other 'professionals' and when i say professionals, i mean people who trade with institutional $, have limited indicators on their platforms. i think why too many people fail at trading is because they complicate things and also look for more exotic indicators. if professionals dont use them, why should you?
the best way to trade is to learn how professionals trade and trade like them. professionals actually make up about 80-90% of all volume in the market. the difference between you and the professional is that professionals have almost unlimited funds.. many of the 'junior traders' get accounts of $500k-1.5m intraday and overnight accounts of about $50-100k
because buying power is virtually unlimited for big traders, you need to implement stop losses.
just to give you an idea of indicators that professionals have and dont have (i dont remember all of them off the top of my head)...
HAVE
moving averages (simple, exponential, weighted, and more)
rsi
adx
dmi
macd
envelopes
channels
DONT HAVE
parabolic sar
bollinger bands
cci
atr
macd histogram
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Registered User
Joined: 12/2/2004
Posts: 1,775
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I agree with a lot of what wse said. Almost to a T every trader I've studied who has documented long term success uses minimal indicators. Many use only price bars/candlesticks, volume bars, and a couple major moving averages. Long time swing trader Alan Farley has a famous quote, "A well trained eye is better than a chart full of indicators." The more indicators you use the more likely they'll start canceling each other out and causing confusion, and the stock market is already confusing enough:) Read both Market Wizard books and pay close attention to what they use. Better yet and more timely, listen/watch Dan Zanger's videos found by googling his name (not on youtube) where he touches on his methods of heavy chart analysis with minimal use of indicators. Zanger holds the record as all time best individual stock trader that's been documented, fwiw.
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Registered User
Joined: 9/25/2007
Posts: 1,506
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Price, volume. the 10, 55, & 200 ema ... along with the ability to draw a trendline ... seems to keep me looking at the green side of the grass ...
I'm just not smart enough to know what to do with most of that other stuff ...
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Registered User
Joined: 5/12/2008
Posts: 102
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Price, 20,50, 200 SMAs, volume and the ability to draw trendlines, plus candlestick recognition, is what I use too.
Pivots points are also plotted on my charts, as is VWAP which is important as its used by institutions and brokers.
To me, its all about support and resistance provided by trendlines, the VWAP, major moving averages and pivots.
Chris
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Registered User
Joined: 5/12/2008
Posts: 102
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Just following on from my post above.....
Support and resistanace from trendline analysis can be amazingly effective. For example, if you look at SPY today, it was bound in a narrow upwards channel from 1pm onwards and then closed just below todays gap window. All this was very predicatable
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Registered User
Joined: 12/2/2004
Posts: 1,775
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QUOTE (operandi) Price, 20,50, 200 SMAs, volume and the ability to draw trendlines, plus candlestick recognition, is what I use too.
Pivots points are also plotted on my charts, as is VWAP which is important as its used by institutions and brokers.
To me, its all about support and resistance provided by trendlines, the VWAP, major moving averages and pivots.
Chris
Well, well, those are the exact moving averages I also use:) Agree very much about keeping things simple and making note of important trend lines, support/resistance, pivot.
Per my quote above attributed to Alan Farley, the entire and correct quote is: "Avoid the complexity trap. A well trained eye is better than a stack of indicators.
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Registered User
Joined: 8/15/2006
Posts: 132
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QUOTE (traderm30) I was just curious as to what other traders here use as far as indicators go? Do you use the Worden indicators as well or just the basics. Just interested in what fellow traders use. Thanks.
I am not sure I fall into the "pro" category, although it is my source of income I only trade for myself and family, but I would say the best thing you can do is learn the charts first, look up trading naked with google and you will find all sorts of information. Then look at an indicator to confirm what the charts says, I see a lot of people trading off the indicators but it all comes down the the price on the chart. Make your tools as objective as possible. If you know how to read a chart then you will know what indicators will help you. Also do not try to over burdon yourself, learn a few stocks, get a feel for them, master them. Remember you are playing with deep pocket pros, either play with them or get creamed, and do not forget, the little guy can move in, out, and about a lot faster so if you play it right you may have an edge.
Scott
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Registered User
Joined: 2/21/2007
Posts: 797
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thanks scotty: thats my goal. I'm trying to keep it as simple as possible, reading charts, overextended either up or down and be able to move in and out with quicker gains and small losses. With the unstable market as it is, i'm not carrying anything overnight. Wait for the next day, pick some good spots, go with the flow. Alot of support and resistance levels. Sooner or later we'll have some stability where we'll be able to go a longer term.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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kind of odd, nobody mentioned bop or moneystream, wordend proprietary indicators.
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Registered User
Joined: 1/12/2009
Posts: 235
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QUOTE (funnymony) kind of odd, nobody mentioned bop or moneystream, wordend proprietary indicators.
I do find that odd. Do you use them?
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Registered User
Joined: 2/5/2006
Posts: 1,148
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QUOTE (traderm30) QUOTE (funnymony) kind of odd, nobody mentioned bop or moneystream, wordend proprietary indicators.
I do find that odd. Do you use them?
yes, i find them good compliments to the other "momentum" indicators.
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 Gold Customer
Joined: 3/28/2005
Posts: 31
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I agree with the minimalist approach to indicators. In the top window I have 10, 40 50, and 200 bar sma. I use the 50 and 200 on the daily chart, and the 10 and 40, which are basically the same thing, on the weekly chart. The assumption, which may or may not be correct, is that the funds will sometimes defend a stock at these averages. In the bottom window I use volume with a 50 period sma to give me an idea of what "normal" volume is. In the middle window I use relative strength vs. the S&P-500 and either money stream(Telechart) or the Williams accumulation/distribution indicator(Stockfinder).
I dont use oscillators much. I think either historical volatility or Bollinger bandwidth might be useful, because I think that volitility is more cyclical than price, but you should be able to get a sense of volatility with just a price chart and the Mark I eyeball.
There are different styles of trading, and I imagine that most of us have some things we can do well and others we do poorly. In my case I'm absolutely terrible at intermediate or long term trend following. I usually get shaken out at the bottom of the first reaction. On the other hand, I've had some luck at short term trading in the S&P, and for this I use plain vanilla 10 min., 60min., and daily charts with no indicators, volume bars, or moving averages at all. If you look at enough intraday charts of the stock indices over the years, you'll develop a feel for the rhythm of the market. Most days the charts won't make much sense but maybe 3-5 times per month the market will throw you a hanging curveball. When this happens, swing the bat and if things don't go as you expect, get out quick. It's not much more complicated than that.
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Registered User
Joined: 10/7/2004
Posts: 2,181
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Just to muddy the waters, I'd like to comment that I believe indicators are great tools (v. price and volume only) so long as one remembers that they (they being indicators) are nothing more than various depictions of price and volume.
With this understanding, indicators may be able to assist many in learning to spot the price / volume patterns that lead to profitability.
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Registered User
Joined: 5/12/2008
Posts: 102
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I think that there are two aspects to this - scanning for suitable stocks and then trading them.
You do need indicators to scan for the right stocks, unless you just scan for specific candlesticks. The Linear Regression 30 line that is such an important aspect of TobyDads system is a remarkable scanning aid, in my opinion.
TSV is also useful for scans.
When it comes to actual trading then I use the set up described. Support and resistance seems to be the central pillar that defines stock movements and using various ways to determine support and resistance is crucial, in my opinion, no matter what the time frame, instrument or duration of the trade.
For example, it would be foolish to buy any stock that is butting up against its 200 MA, no matter what indicators you are using.
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Registered User
Joined: 2/13/2005
Posts: 368
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The most important thing I learned is that you can get rich trading only a few stocks. The professionals that I talk with generally only trade three or four stocks exclusively and they know these stocks like the back of their hand. They go long, short, and write options on them. I am only trading a few stocks now and my success rate has improved dramatically. My only technical indicators that I reference now are the support and resistamce levels as well as the donchian60 levels for the stocks that I trade. I also watch these levels for the major indexes.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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Well said guys, wise advice all. I agree very much with thekubiaks that concentrating/watching and trading a small handful of stocks is the way to go. Earlier in my trading I would sometimes have 12 to 15 stocks on, all very small positions with intent on adding to the strongest and quickly cutting the laggards. Sounds nice in theory but I found it very difficult and draining. I made a sudden shift in my method at the time to try and never have more than 4 or 5 positions at once, with concentration of funds as much as 33- 40% in a single stock, and significantly improved results.
Good comment operandi on support/resistance being pillar of stock movement. I think it all goes back to keeping things simple on a chart. A pretty chart with bunches of pretty indicators gets trumped every time imo by the basics of price, volume, support/resistance.
The three most famous documented individual traders I can think of...Jessie Livermore, Nicholas Darvas, and Dan Zanger, all concentrated their money in a very small handful of stocks, and same for many of the traders in the Market Wizard books.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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price, support/resistance, volume are the best.
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Registered User
Joined: 2/21/2007
Posts: 797
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What's everyones opinion on using volume with minute trading?
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Registered User
Joined: 2/13/2005
Posts: 368
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QUOTE (johnlc)
What's everyones opinion on using volume with minute trading?
I tried trading at the "minute" level and ended up staring at the screen and CNBC all day waiting for some "action". Volume can be useful but is extremely time intensive to monitor on a bunch of stocks. I wrote some volume alarms for Tradestation to start beeping at me when volume exceeded 200% of the normal 120 tick volume average. Once again, it can get you in early on the start of a trend but takes a lot of focus but can also drive you nuts with false alarms and false breakouts. The only time I am really watching volume closely is after 2:30PM when the institutions start trading the big money (especially at 3PM when the mutuals start liquidating and filling). Now, I am trading stocks and options (covered calls / naked puts) , I set my buy and sell levels with conditonal orders and then go play Golf or ride crotch rockets....
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Registered User
Joined: 1/30/2009
Posts: 267
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QUOTE (thekubiaks) QUOTE (johnlc)
What's everyones opinion on using volume with minute trading?
I tried trading at the "minute" level and ended up staring at the screen and CNBC all day waiting for some "action". Volume can be useful but is extremely time intensive to monitor on a bunch of stocks. I wrote some volume alarms for Tradestation to start beeping at me when volume exceeded 200% of the normal 120 tick volume average. Once again, it can get you in early on the start of a trend but takes a lot of focus but can also drive you nuts with false alarms and false breakouts. The only time I am really watching volume closely is after 2:30PM when the institutions start trading the big money (especially at 3PM when the mutuals start liquidating and filling). Now, I am trading stocks and options (covered calls / naked puts) , I set my buy and sell levels with conditonal orders and then go play Golf or ride crotch rockets....
I like your life style. I am almost there myself except there are no golf courses close to my house but the crotch rocket is sitting in the driveway (:-)).
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Registered User
Joined: 5/12/2008
Posts: 102
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Trading just a few instruments is great advice. If I'm not careful I find myself getting distracted by finding the days highest percentage gainers, spending ages looking through their charts and then end up not making any good trades.
I always monitor the SP500, drawing trendlines and watching for S&R levels. I then only trade a stock when it moves in the same direction as the indexes. However with stocks you then have both the influences of the indexes and the factors affecting that stock such as down/upgrades, news, rumours etc
Its dawning on me that I can make very good money by just trading the indices with ES futures and ETF's such as SSO, SH, SDS SPY. Add in the NAS and DOW, which move in a similar fashion to the S&P and you have more than enough trading capacity, without the additional complexities and challenges of individual stocks.
There is another very important and overlooked aspect of charts and trading that was briefly alluded to by thekubiacs. That is time.
The important times of the day are 10.00, 10.30, 3.00 and 3.30, all EST. Check your intraday charts and see how many show reversals at these times. Its uncanny.
If you plot your pivot points and S&R levels and then factor in time, you can then almost create a mechanical system with preset buy and sell orders. This is what I'm working towards.
Chris
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Registered User
Joined: 12/2/2004
Posts: 1,775
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QUOTE (operandi)
The important times of the day are 10.00, 10.30, 3.00 and 3.30, all EST. Check your intraday charts and see how many show reversals at these times. Its uncanny. Chris
Good tip there on specific times to watch for. A rule of thumb I try to follow is not making new buys first half hour to hour which coincides with your times, and waiting instead for the last half hour or so to see if the big boys step in and show support. Another time I like for buying is the lunch hour when stocks that did well early in the session have their mid day siesta and drop on low volume, offering a decent entry point.
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Registered User
Joined: 10/7/2004
Posts: 816
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Real solid information and guidlines.
Thanks everyone.
Years ago I started off hand charting about 200 issues (in the 60's) and gradually developed some charting capability on an old Apple computer when they finally came out. Eventually Supercharts arrived and I used that on a pc until it died at Y2K. MetaStock and OmniTrader also arrived and scanning even more charts became feasible.
Now with the easy and fast scanning features of TC and Stockfinder I'm concentrating on just optionable stocks from the S&P-500 and Nas-100 and ETFs. Many more than I originally started with - but much less time involved.
Regarding all the indicators -
- I essentially try them all to see if there is something about them that will add to the selection/action process.
In addition to the trend lines, moving averages (including the zero lag ones), support/resistance I really like stochastics - all done on 3 different time frames.
One thing that I would like to point out about the indicators - it's real easy to create composite indicators with RealCode (for like indicators e.g. bounded ones (similar ranges)) - or - combining different indicators using straightforward Rule combinations. In fact using Rule combinations allows for an easy and flexible sequencing of events. (RealCode does too but with a little more work)
Once again - many thanks for the guidance
Regards
BobMc
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Registered User
Joined: 12/2/2004
Posts: 1,775
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Hey Bob, great post, thanks for sharing. Even though I've often mentioned that the only indicators I now use are a couple or three moving averages, I by no means think it's the only way to go, it's just what I like and I find it simple. Good point about keeping one's universe of stocks to study to a relatively small pool. I envy you guys who started out a lot earlier and were forced to hand chart...it had to have made you a better technician and at a faster rate. With all the new age great super fast charting software I think it can be overload at times, particularly for those very new to trading. I know that when I first started using Telechart I was overwhelmed with my scan results. Neophyte trader Nicholas Darvas (How I Made $2,000,000 in the Stock Market) states in his book that he didn't even have hand charts; he simply wrote the closing prices down every day and gradually got to know the feel of the stock so well that he called himself a "mental chartist." :)
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Registered User
Joined: 1/30/2009
Posts: 267
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In the beginning(early 80's), when I started trading commodoties, my friend and I used to hand chart almost every commodity every day. We had a lot of binders full of charts. In addition, we would write down on a separate spreadsheet the OHLC and change from the day before. I also used supercharts when it came out, I believe it was windows 3.1 (showing my age). But that being said, this may be why I barely use indicators. I find that indicators will tell me where a stock is historically, but I can't see where it helps me going forward. Indicators can adjust to the price instead of the opposite. Support, resistance, and trendlines seem to work well for me. But, in this fundamental market, the techinals are difficult so sometimes it's better to stay on the sidelines. Now, getting back into it, I do find the new software a bit overwelming but it's just another tool that I need to learn.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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QUOTE (hiromj) In the beginning(early 80's), when I started trading commodoties.........
Interesting. Speaking of commodities, why did you go back to stocks, or are you now trading both? After reading The Complete Turtle Trader I became intrigued with the idea of one day trying my hand at futures trading. I understand one can trade up to 100 to 1 margin intraday, and 10 to 1 or greater overnight depending on the commodity....is that true?! Fast way to riches and of course fast way to go broke fast at warp speed.
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Gold Customer
Joined: 3/28/2005
Posts: 31
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I think I can help you a bit on the futures issue. Up until the late 1990's, I traded futures exclusively. Trading is a business and, at that time, the cost of doing business was less in the futures markets. By this I mean that slippage and commissions were less in the more liquid futures markets such as the S&P and T-bonds. Even with discount brokerages, stock commissions were 4-5 times higher than in futures. Plus stocks traded in eighths, so you could figure at least that much slippage each way unless you used limit orders. Now stock commissions are a few bucks each way and they trade in pennies so slippage is less. Also, because of the high volume compared to 15 or 20 years ago, stocks are more liquid than they used to be.
You're right about the leverage. It can be enormous. I don't know what the margins are today, but when I was trading, you could trade 20 or more bond contracts with a $100,000 account--but you would be completely nuts to do so. You don't have to use all the leverage that is there, and it's foolish to do so.
If you want to try your hand at futures, I would say that a couple of good beginner's markets are bean oil and eurodollars. Beans, juice and coffee are trecherous markets. Bellies should not be traded by any rational person. The currencies used to be good trending markets, but now that the Forex is open to the common man, there wouldn't seem to be much point in trading the currency futures. The E-Mini S &P is probably a good one. Ditto for the 10-year note: it's liquid but with maybe only two thirds the volatility of the 30-year bond.
I can't really say that trading futures is either harder or easier than trading stocks. Each market has its own quirks. It's just that you can blow yourself up faster in futures. The key to either one is risk management and discipline.
Hope this helps.
Beans-in-the-teens!
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Registered User
Joined: 2/1/2005
Posts: 36
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I'm a strong believer in the K.I.S.S. method. I use simple moving averages 21,50 and 200. Middle: Vol obv and bottom stoc 14 3 3.
My criteria for going long would be price pulling back to and finding support on one of the three avgs with stoch raising up above 20. Example would be my opening position in PQ thursday. My stop is just under the 21 day sma, my target the 50 day at 4.00. Hopefully my take will be 1.25.
The apposite is true when looking for shorts. Here i look for stocks in a strong down trend that rallied to one of the three averages with stoch near 80. My trade in UNG on 3/25/2009 is an example of what I look for in shorts.
Nothing is 100% and for me the holy grail is not found in any indicator but rather risk/money management. Always place stops after opening your position because Mr Market is always right.
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Registered User
Joined: 12/2/2004
Posts: 1,775
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QUOTE (jlsmith) I think I can help you a bit on the futures issue............
Definitely helped, thanks. I see that futures trading is not something I would want to jump into on a whim and think because I can trade stocks I could easily trade futures, would really need to study, study, read books.
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Registered User
Joined: 12/12/2007
Posts: 26
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Guys,
Just picking up on this post today and I’ve got to say there is some really great stuff in there. I agree with the general maxim of having less indicators or at least restricting their use to a couple that you are familiar and comfortable with. Just to add to the list I also use the 20, 50 & 200 DMA. I use volume and OBV in the middle window however i was interested to hear about jlsmiths addition of the 50DMA to the volume bars in order to get a handle on the ‘normal’ daily volume – hadn’t occurred to me to apply this DMA to the volume – i will definitely take it for a test drive.
Now... what I wanted to get some opinion/advice on is where do you guys stand on fundamentals?? I believe there’s plenty of option on what technical’s to use or not use but surely we want to back these indicators up by sound fundamentals – especially if going long. I know this information is available on TC but do you believe it’s enough to rely & make decisions on. There are rating agencies and publications out there with their own company fundamental & industry rating e.g. IBD – what are you views on these. Do you subscribe and do you believe they are value for money.
Thanks in advance.
Darcy54.
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Registered User
Joined: 2/21/2007
Posts: 797
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Companies cook the books? Not in corporate america. We have D.C. as our watch dog, looking out for all of our interests. Each and everyone of us will be well taken care of.
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Registered User
Joined: 2/5/2006
Posts: 1,148
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Fundamentals will only cloud your thinking.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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I just finished running some tests on different methods of stock
selection.
I used the bullish period from the March/10/09 rally to May/8/09 for longs.
I used the bearish period from 2/10/09 to 3/10/09.
Each system bought/sold stocks every Friday over
the time period and held long/short until the end date.
(I wanted to see how robust these things were)
This involved approx. 3200 trades long and 2050 trades short.
The average return on the better long systems was 92% the worst was 1.39%.
The average return on the better short systems was 18.5% the worst was .35%.
If you don't believe what you go long or short in matters.
You probably haven't looked.
Thanks
diceman
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Registered User
Joined: 3/6/2009
Posts: 78
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Interesting test diceman. could you please clarify a few things?
what did you use to run these test? did you use a backtesting software or do it all by hand? That would be quite a feat to track 5250 trades by hand.
when you say "better long systems" and "better short systems"; are you saying that you used several systems and only reported the better system?
what was the system you used?
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Registered User
Joined: 1/28/2005
Posts: 6,049
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The stocks were found using various telechart sorts as
well as some things of my own creation.
Returns were generated exporting symbols into software
of my own creation to generate returns. I also have stuff
set-up in tradestation to generate returns.
I should say that while that many transactions were tested.
It didn't involve that many stocks as many sorts gave the
same candidates week after week. (or only changed 1 or 2 stocks)
By systems I'm talking about price, fundamentals, quality, performance,
parameters.
No chart action, or indicators were used. Although I do believe
I required avg volume of at least 100,000 shares.
Thanks
diceman
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Registered User
Joined: 3/6/2009
Posts: 78
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Thanks for the explaination.
using your results, one would be hard pressed to go wrong if they followed the trend. especially a bull market.
the only fly in the ointment would be to determine the trend while we were in it. do you have a system for that?
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Registered User
Joined: 2/21/2007
Posts: 797
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pray
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Registered User
Joined: 2/21/2007
Posts: 797
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Diceman: a question: aka apsll, i see you also have trade station. I am in the process of changing brokers. Consider that i am not a computer guru as you are. How would you rate their trading simulation platform for ease of use? I am sure their trading platform is as good or better and easier than everyone else, plus i know their research is top notch. What i am mostly interested in is simulation where different senarios can be plugged into past history to determine results.
Thanks
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Registered User
Joined: 1/28/2005
Posts: 6,049
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johnlc
Its tuff to tell how others would react to it as you don't know
what would be difficult for someone else.
The main reason I liked is a lot of the old Tech. Analysis of
Stocks and Commodities magazine stuff was in easylanguage.
(their software)
I like it because I can set things up exactly as I want.
I like to set colors on things and alerts when things happen.
Commissions are $1 per hundred shares.
Some drawbacks:
There is a $100 a month fee if you are not active enough.
(obviously if you have a low cost broker 15 to 20 trades and your
covered)
If your very active its free.
Backtesting comes free with it but you can only test one symbol
at a time.
They have a lot of canned stuff ready to go for back-testing.
Indicators, trailing stops, moving averages and so on.
(They have a newer version available for download and I don't know if that's changed)
So I would say if you are a relatively infrequent trader there are probably
better things.
If you are interested in heavy-duty backtesting with a lot of
symbols there are probably better things.
Thanks
diceman
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