I usually don’t cover much on technical indicators because I don’t need them every day. I like to take a look at them once every 2 weeks or so just to see what all of these indicators are trying to tell me.
There are not perfect and they are not “sure things”. The purpose of these indicators is to confirm price/volume action and their significance should not exceed those of the basics (price, volume, candles, moving averages, sup/res, etc.). What I like to find when analyzing indicators are divergences among them. Just as volume sometimes creates a divergence with price, so do technical indicators with the broad market.
There are many indicators, but here are twelve that are commonly used:
1) RSI (Relative Strength Index)
2) MACD (MA Convergence/Divergence)
3) CCI (Commodity Channel Index)
4) TRIX
5) Force Index
6) Slow STO (Slow Stochastics)
7) OBV (On Balance Volume)
8 ) MFI (Money Flow Index)
9) ROC (Rate of Change)
10) WM%R (Williams %R)
11) A/D Line (Accumulation/Distribution)
12) ADX (Average Directional Index)
You’re charts are god.
I forgot to point out that the bollingers have been contracting in a narrow range (like before the Oct meltdown). Big move coming to forcefully expand the bands.
Broke 920, if it looks like we close above 920, what is the plan of attack?
CA you are the man… I loaded up on FAZ, SDS, and SRS w/ a 30% cash position… Do you think this was a smart move? I’m seeing through my indicators what you’re seeing through yours, so like Mushroomz said, what’s the next move?
ZM
I always buy on the pullback after a breakout, the regression to the mean. The reason is because it could be a fake breakout. Waiting for the pullback ensures a safe long entry. Depends on risk tolerance.
You should draw some conclusions instead of more lines.
to a TA rookie, whats all this supposed to mean
r we looking bullish short term?
hmm..I just did.
Wait for the damn pullback. Stop getting Trigger Finger Fuckery Syndrome
hey chart addict
in your first tabbed post you mentioned a site to start learning chart reading. what was that site? thanks
I am writing a 25-article series for Wall Street Survivor which will be published in print in the future. A third of the articles are available online free right now:
Technical Trading 101 section: http://wallstreetsurvivor.com/Public/Learn/SurvivorU/SurvivorU_Home.aspx
More will come as I find time to write them.
Hey CA. Do you use a combination of systems as well as discretionary trades or predominantly one or the other. I’ve been developing systems for various market conditions, but one problem I’ve run into is keeping my capital at work. Sometimes I’m sitting on the sidelines waiting for signals while the market moves in one way or the other. Any ideas other than having multiple systems at work at the same time to generate multiple signals? Thanks for your most excellent, non-gay work.
I do a mix of mechanical and discretionary. I just look at hundreds of stock charts manually every night for my set ups. I’m not smart enough to be creating programs and stuff. You may want to use a mechanical system. It takes emotions out of trading (if you’re on the sidelines a lot, that may be the reason). I keep things very simple. I use free services/scans, look at my own charts, etc. and I try to limit it to price, volume, candles, ma’s, support/resistance/trendlines, and sometimes bollingers. A complicated system doesn’t translate into positive results.
As for descriptions and uses for the 12 indicators to anyone that was wondering, I was too hung over this morning and didn’t feel like writing 12 additional paragraphs. Seriously. So I will detail it all out in my next post.
Junk, there is nothing wrong with sitting on the sidelines. I would bet that as we get back to the regularly scheduled bear market, and the worst bear market since 19xx disappears, you’ll be getting more signals.
Although I do feel your pain. My systems quit giving signals for almost the entire last quarter.
The other thing you might consider is whether you feel like fiddling around, or just get bored, sitting on the sidelines a lot. I know I do, and it makes me want to fiddle, and muck around in trades I shouldn’t take. What you might want to consider is a simple long/short system that is in the market all the time. Allocate a small portion of your capital to it, and let it run. That way you’ve always got some skin in the game, and it keeps the boredom from setting in as badly.
Glad to hear your still developing and trading systems.
Discretionary trading without significant amount of capital = self inflicted haircuts.
I would say that only one in a thousand could do that well in a Bull market and much much less than that in a bear.
But I’m a post-structuralist non day trader who prefers Game Theory to Fundamentals.
I love me some Technical Analysis…
I love me some Technical Indicators…
————————————–
Like rear view mirrors…
…they are wonderful at telling me where I’ve been…
…AFTER…
…I’ve been there !!!
SIGH !!!
.
alf,
I can tell you’ve lost a lot of money at a certain period in your life.
…and I can tell YOU haven’t ! LOL
————————————-
Oh…to be young and stupid again…and actually BELIEVE…that the “answer” is somewhere buried in a collection of redundant technical indicators.
SIGH !!!
.
Wrong. Re-read my blog posts.
Trying to explain a bunch of things to you will simply be a waste of time. You don’t read carefully, you don’t understand what TA is, how it’s formed, what it’s used for, when and how to use indicators…nothing.
Indicators are lagging. Do you know what that means? Are you looking for some “holy grail”? Get the fuck out of here moron. I know your type.
I’m deleting future comments from you because your comments are just too fucking stupid. I don’t even know where to start. The way you write annoys the fuck out of me. You write like a child.
Bye.
CA, Been reading on this blog very informing, I appreciate what you guys write on here. Keep it up!!!!!! I’ve learned a lot and am starting to make some coin, I really follow the stochastic and take profit when I can and try not to get greedy. Thank again for the insight
CA,
This is a positive critique. I may have to agree with alf44 because most of them are redundant indicators. I have 3 custom made by me in my charts and i think thats plenty just because most of the indicators are derived price action and volume.
I will get so confused just by looking at them…but thats me.
Freddy: appreciate your thoughts along with the iBC bloggers. I’ve started using a handful of indicators and will check out others recommended. On practical level, my set-up has me input each ticker, where I can have multple tickers in a watch list. Wondering if you run thru the same iteration to individually review charts? Feel this is time-intensive but maybe necessarily so. As always, anybody is welcome to chime in.
most people don’t even understand how these basic indicators work.
for instance, suppose a stochastic indicator (10) is 76.
do you know what that means?
It means that the price is currently 76% of the way to the highest it ever was in 10 days.
Now, aside from a tendency towards mean reversion…ask yourself the following question.
If I, as an anon poster, put in the PG a post that posited the following:
“The highest GOOG has been in the last two weeks is 329. At 321, it is near the top of that range, and therefore overbought”
Most would probably find that to be a rather specious argument, no
What does 10 mean? Why 10 periods? Is there a magic market tidal cycle I don’t know about? I know there is, but it’s not a rigid ten. It may be 7.6 for this stock, 13 for that. how will you figure that out? What if it changes? Can’t you just visually see that the price moved in the last 10 days and guesstimate what percent that is?
MACD – the space between a moving averages. so if the space between the 5 day MA and the 20 day is big, stock must have moved a lot, no? Again, this is just price in a context, another visual of how prce moved (a lot, quickly, in this case) but how does that provide a signal?
do you fade it? or is it something bigger?
All they do, MACD, RSI, STOCHS, they are all very similar, is help you put the price into a context. There is a construct that the price will respond more reliably at an extreme reading, but really it is just helping you identify and extreme price to make a trade.
Anyway, I personally think a lot of thse are much less useful that they are touted to be, but mainly, it’s important to understand what it is that you are indicating.
This isn’t directed towards anyone, it’s just in general.
My advice to anyone thinking of using these indicators: keep them to a minimum. No one NEEDS indicators to trade well.
If you notice on my daily posts, I keep things very simple. I just stick with price, volume, MA’s, sup/res, trends, and that’s it. The more simple, the better.
Danny – I think indicators are best used in finding intermediate or long-term divergences. Everything else is kinda ehh.
Bob,
Everyone has a different set up in which they feel comfortable…Im a swing trader and have a timeframe from 3 days to weeks. My system is custom, based on relative strength ranking, not based in indices, but each stock against each other. Same for sectors. Its designed to be quick, for example; when everyone was looking at SRS, my scan was issuing buy signals for shipping stocks 12/30/08 because they were high relative strength ranking and mainly a daily timeframe due to the internal calculations( this is due to the dark pools ‘effect’ which shows up at the end of day print). And i have with chart patterns to enter the trade.
All of this uses market breadth as a the overall market buy and sell signal. 1 indicator issued a buy signal on nov 20 and my second on the nov 21…which ended up being the market short time bottom and the low for the time being. Thats why im being arguing with DevilDog about being short when the market is uptrending. Why argue with Mr Market.
Also, i keep track of market statistics, because the market numbers dont lie and the market is always right. Designed indicators based on those numbers.
Due to questions like yours, i made yesterday a little blog so you can have an idea how i do my stuff, but most is not there.
http://hectorsmarketindicators.blogspot.com/
Again, its my own way that i do stuff, every one is different is profitable for me and easy to understand.I will like to explain, but is propietary and i invested many 100’s of hours just in development. However, the technical part of Fly’s PPT has some similarities to mine.
Danny, i completely agree with you and this quote explains my point of view;
“Every stock is like a human being: it has a personality, a distinctive personality. Aggressive,
reserved, hyper, high-strung, volatile, boring, direct, logical, predictable, unpredictable. I often
studied stocks like I would study people; after a while their reactions to certain circumstances
become more predictable.” Jesse Livermore
Like a psycho (ex)girlfriend.
I use MACD and RSI on short and long frames, I just weight them in my analysis in a different way than I guess others do.
What it comes down to is, whatever you do to generate your returns, do it. RSI 90 means nothing compared to knowing what to do with it.
I sometimes use Stochastics, twisted a little with my indicator and use it so pinpoint extremes. Same as Danny’s view of what it means.
I just create my own.
I created two in 2008: The Z-Score DJIA timer and the Qsinator
I also think that correlations, trends, edges disappear almost as fast as they appear but every trade I lost money on was one in which I “thought” I could out-think the market.
That works for investing, for trading I feel better using technical indicators that I wired up myself.
Why are my posts being deleted here ???
Why am I being targeted ???
Why is that ???
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