What's your favourite combo of indicators?

[Aceyducey]

Guys, which indicators do you use regularly in your trading & why?

Personally I keep Stochastic & MACD onscreen at all times & often refer to Momentum as well.

I also keep a close eye on the company's ratios & executive/board trading. If the executive are buying or selling, there's definitely something to investigate :)

Cheers,

Aceyducey

[still_in_school]

Hi Aceyducey,

favourite indicators... MACD & RSI, and every now again may use EMA..

ideally i like the use of OHLC & Candlesticks,the market depth and the amount of volume traded each day over a 3 month period broken down into weekly then daily periods...

for fundamental, growth and blue chips, like stocks in the top 150 and for midcaps in the top 300

Cheers,
sis

[wayneL]

Take your pick guys, they all measure the same thing...price and/or volume over a time period!

But FWIW the institutions use the following simple moving averages as buy/sell areas, but are by no means a sure cop:

20 SMA
50 SMA
200 SMA

Also keep an eye on Fibonacci levels as they are also widely used and therefore self fulfilling.

I think it is useful to disect the mathematics of the indicator to understand what it is they are measuring.

For instance:

MACD simply measures the distance between the 12 day exponential moving average and the 26 day exponential moving average, plus another moving average of this relationship.

Stochastic measures the relationship of the closing price to the highest high and the lowest low of the last x number of days, smoothed(averaged) by a factor of 3 usually.

Momentum measures the distance from todays x day EMA to the x day EMA at some point in the past.

RSI is a bit more complicated but essentially measures the exact sme thing in a slightly different way.

If you understand the mathematics of the indicator, suddenly it becomes insignificant because you can visually see these relationships immediatley in the price without refering to the indicator.

As you guys develop in your trading you will sense that these indicators give you no edge whatsever and that they are essentially a crutch to justify a buy or sell decision.

After having said all that, indicators are useful in that they can be useful to smooth out and interpret the noise inherent in the raw price data.

Also they are usefull as scanning tools to track down stocks that are on the move.

If you must use indicators, (remembering that they all measure price/volume) use one only. understand exactly how that indicator measures price/volume. Get to know all the nuances of the indicator and how it can be used in ways other than how the textbook says it should be used.

The best way use an indicator is not when it crosses such and such a line. Look for the patterns in the indicator and how that relates to price. In other words think outside the square.

I use the Commodity Channel Index ;D

[wayneL]

I should point out something here.

The standard CCI signals are buy when CCI crosses above -100 and sell whenn CCI crosses down below +100.

This is not how I use this indicator at all. I will explain later if anyone interested.

Cheers

[Joe Blow]

I find Bollinger bands are a good indicator to see whether a stock has been oversold or overbought.

Good for short term trading... anyone else use them?

[JetDollars]

I currently using Candlestick patterns indicators, EMA, RSI to look for opportunity, only papertrading though.

But I will learn as you go...

Thanks guys for those information, honestly I only know 50% or less of what you wrote above.

[Bobby]

Take your pick guys, they all measure the same thing...price and/or volume over a time period!

But FWIW the institutions use the following simple moving averages as buy/sell areas, but are by no means a sure cop:

20 SMA
50 SMA
200 SMA

Also keep an eye on Fibonacci levels as they are also widely used and therefore self fulfilling.

I think it is useful to disect the mathematics of the indicator to understand what it is they are measuring.

For instance:

MACD simply measures the distance between the 12 day exponential moving average and the 26 day exponential moving average, plus another moving average of this relationship.

Stochastic measures the relationship of the closing price to the highest high and the lowest low of the last x number of days, smoothed(averaged) by a factor of 3 usually.

Momentum measures the distance from todays x day EMA to the x day EMA at some point in the past.

RSI is a bit more complicated but essentially measures the exact sme thing in a slightly different way.

If you understand the mathematics of the indicator, suddenly it becomes insignificant because you can visually see these relationships immediatley in the price without refering to the indicator.

As you guys develop in your trading you will sense that these indicators give you no edge whatsever and that they are essentially a crutch to justify a buy or sell decision.

After having said all that, indicators are useful in that they can be useful to smooth out and interpret the noise inherent in the raw price data.

Also they are usefull as scanning tools to track down stocks that are on the move.

If you must use indicators, (remembering that they all measure price/volume) use one only. understand exactly how that indicator measures price/volume. Get to know all the nuances of the indicator and how it can be used in ways other than how the textbook says it should be used.

The best way use an indicator is not when it crosses such and such a line. Look for the patterns in the indicator and how that relates to price. In other words think outside the square.

I use the Commodity Channel Index ;D

Hullo Wayne,
I thought your old post so good that here it is again !.
As much time has passed have you found anything new ?

Regards Bob.

[bullmarket]

Hi Bobby

For what it's worth I tend to keep to the KISS principle for charting.

I use the following indicators:

1) 3 and 10 day moving averages

2) Volume

3) Stochastic Indicator (momentum type indicator)
Settings: %K = 10 days, %D = 5 days, Smoothing = 1

4) MACD, MACD-H Indicator (trend following indicator)
Settings: 5 and 15 days for the two MA's and 10 days for the trigger line

5) support/resistance/trend lines

6) Sometimes use Bollinger Bands to 'guesstimate' potential price targets (upper/lower bollinger bands) and Fibonacci Retracements for potential price targets as well.

cheers

bullmarket :)

[tech/a]

Indicators regardless of which you choose simply supply a beginning and an end.

Just as a product and a purchase price does in a business.

What you do in the middle will determine success and how often you do it right will determine continued success.

Just as overheads and COGS will determine profitability in any business.

The day a trader undrestands that its not the analysis,Technical or Fundamental or both that determines consistant profit is the day the trader becomes one of the "3-10%" who will be consistantly profitable.

[Prospector]

Hi Bobby

For what it's worth I tend to keep to the KISS principle for charting.

I use the following indicators:

1) 3 and 10 day moving averages

2) Volume

3) Stochastic Indicator (momentum type indicator)
Settings: %K = 10 days, %D = 5 days, Smoothing = 1

4) MACD, MACD-H Indicator (trend following indicator)
Settings: 5 and 15 days for the two MA's and 10 days for the trigger line

5) support/resistance/trend lines

6) Sometimes use Bollinger Bands to 'guesstimate' potential price targets (upper/lower bollinger bands) and Fibonacci Retracements for potential price targets as well.

cheers

bullmarket :)

Hey, I use the KISS model too! With focus on the MA and Volume. I read in the glossy Australian Wish magazine (the one from last Friday) that one Investment Manager said his best investment ever was buying a particular share at $4 four years ago and was now worth $12 :o Crikey, I think even I could teach him something! I would be so disappointed if that was the best I had done, and I am only a junior punter!

[bullmarket]

Hi prospector


Hey, I use the KISS model too! With focus on the MA and Volume. I read in the glossy Australian Wish magazine (the one from last Friday) that one Investment Manager said his best investment ever was buying a particular share at $4 four years ago and was now worth $12 Crikey, I think even I could teach him something! I would be so disappointed if that was the best I had done, and I am only a junior punter!

geeeeeez.....you're hard to please :D $4 to $12 in 4 years = 31.6% pa compound return.........I'll take that any day :)

But I get the jist of what you're saying :sly:

btw.....in addition to my previous post, I always go on what the price action is saying first and then look to the indicators for confirmation hopefully. If the indicators confirm the price action then I am more confident my interpretation of the chart is likely to be correct. All indicators regardless of the settings one uses will give false signals occassionally.

cheers

bullmarket

ps....CSI NY is about to start....have a relaxing evening whoever is reading this :)

[wayneL]

Hullo Wayne,
I thought your old post so good that here it is again !.
As much time has passed have you found anything new ?

Regards Bob.

Nope, still use CCI as a crutch. Sometimes I'll chuck on a MACD if I think there's a marginal divergence setup. But most times the obvious ones I can see in the price action, so no need.

But with the CCI, I know exactly how it is calculated and know when it should be ignored and when it's showing me something useful.

[wavepicker]

Guys, which indicators do you use regularly in your trading & why?

Personally I keep Stochastic & MACD onscreen at all times & often refer to Momentum as well.

I also keep a close eye on the company's ratios & executive/board trading. If the executive are buying or selling, there's definitely something to investigate :)

Cheers,

Aceyducey

Personally, I try to steer clear of using indicators as they are like chasing shadows across the computer screen.
For me the best indicators are a simple bar chart and volume coupled with pattern, price and time. However I sometimes use the MACD to further reinforce any assumptions made from the above.

[tech/a]

btw.....in addition to my previous post, I always go on what the price action is saying first and then look to the indicators for confirmation hopefully. If the indicators confirm the price action then I am more confident my interpretation of the chart is likely to be correct. All indicators regardless of the settings one uses will give false signals occassionally.

Frankly when you look at any chart with positive price action you'll get indicators confirming that price action as all indicators are lagging.They are made up of PAST price action.If you use an indicator with a periodicy of 10 or 14 days and expect it to confirm price action of the last 2 days then your going to be disappointed.Incorrect use and application of indicators is by far the greatest error made by would be technicians.Understanding how they are compiled brings a new dimension to brainless plotting.False signals are proportionate to correct use in my veiw.

Infact stochastic along with RSI is one of the most commonly mis used indicators.
Anyone like to hazzard a suggested Sell signal from a stochastic or RSI?

ALL indicators are made up of either a combination of
Open
Close
High
Low
Volume or open interest.

Many like Stochastic and MACD are telling exactly the same thing as their components are just the same.Like taking a bus or a car to the same destination its a matter of opinion as to which is most efficient.

I'm with Wave picker/Wayne in that I use Price action well above any indicator for entry signal and longerterm analysis.Fib and Elliot are excellent for short term levels.As a filter for mass segregation there is an application,as for setup in the long run if used properly only a 50/50 proposition --if used incorrectly far less---and traders wonder why.

See people think that a magical indicator or 5 or a positive Fundamental evaluation of a company guarentees success,when they dont get it CONSISTANTLY they blame their analysis.
Fact is they believe that their analysis if correct over 50% of the time guarentees success.

Yet I can prove that a 7/10 hit rate doesnt equate in some cases to success.
The method I use has a 35% success rate and is tremendously profitable.
Well over 30% compounded return.

[Julia]

Hey, I use the KISS model too! With focus on the MA and Volume. I read in the glossy Australian Wish magazine (the one from last Friday) that one Investment Manager said his best investment ever was buying a particular share at $4 four years ago and was now worth $12 :o Crikey, I think even I could teach him something! I would be so disappointed if that was the best I had done, and I am only a junior punter!

Hi Prospector:

I'm with you. This is an INVESTMENT MANAGER and that's the best he can do?

Well, I'm glad I don't have my money in his Fund whatever it might be!

Julia

[Bobby]

Hi Prospector:

I'm with you. This is an INVESTMENT MANAGER and that's the best he can do?

Well, I'm glad I don't have my money in his Fund whatever it might be!

Julia

Well said Julia !
That did make me smile :) thanks.

Bob.

[GreatPig]

That would be pretty good as a portfolio average (about 32% pa), but if that's the best single share, I wonder what his overall average is.

My "best ever" investment share is currently sitting on about 71% after 5-7 months (I bought it in two parcels in August & October 2005).

And I've only been doing this for about a year.

GP

[Bobby]

Frankly when you look at any chart with positive price action you'll get indicators confirming that price action as all indicators are lagging.They are made up of PAST price action.If you use an indicator with a periodicy of 10 or 14 days and expect it to confirm price action of the last 2 days then your going to be disappointed.Incorrect use and application of indicators is by far the greatest error made by would be technicians.Understanding how they are compiled brings a new dimension to brainless plotting.False signals are proportionate to correct use in my veiw.

Infact stochastic along with RSI is one of the most commonly mis used indicators.
Anyone like to hazzard a suggested Sell signal from a stochastic or RSI?

ALL indicators are made up of either a combination of
Open
Close
High
Low
Volume or open interest.

Many like Stochastic and MACD are telling exactly the same thing as their components are just the same.Like taking a bus or a car to the same destination its a matter of opinion as to which is most efficient.

I'm with Wave picker/Wayne in that I use Price action well above any indicator for entry signal and longerterm analysis.Fib and Elliot are excellent for short term levels.As a filter for mass segregation there is an application,as for setup in the long run if used properly only a 50/50 proposition --if used incorrectly far less---and traders wonder why.

See people think that a magical indicator or 5 or a positive Fundamental evaluation of a company guarentees success,when they dont get it CONSISTANTLY they blame their analysis.
Fact is they believe that their analysis if correct over 50% of the time guarentees success.

Yet I can prove that a 7/10 hit rate doesnt equate in some cases to success.
The method I use has a 35% success rate and is tremendously profitable.
Well over 30% compounded return.

Go Tech,
Yes mate them indicators can Suck you out, thats why many feed the eaters like you & me :D

Bob.

[Bobby]

Nope, still use CCI as a crutch. Sometimes I'll chuck on a MACD if I think there's a marginal divergence setup. But most times the obvious ones I can see in the price action, so no need.

But with the CCI, I know exactly how it is calculated and know when it should be ignored and when it's showing me something useful.

Hullo Wayne,
Just had to ask you about your use of CCI, I don't use this , I think its a tool for trading cyclical trends & trying to predict some sort of cycle of moving averages.
Its another osillator ! :)
What is it in your trading application ?please.

Regards Bob.

[It's Snake Pliskin]

Frankly when you look at any chart with positive price action you'll get indicators confirming that price action as all indicators are lagging.They are made up of PAST price action.If you use an indicator with a periodicy of 10 or 14 days and expect it to confirm price action of the last 2 days then your going to be disappointed.Incorrect use and application of indicators is by far the greatest error made by would be technicians.Understanding how they are compiled brings a new dimension to brainless plotting.False signals are proportionate to correct use in my veiw.

Infact stochastic along with RSI is one of the most commonly mis used indicators.
Anyone like to hazzard a suggested Sell signal from a stochastic or RSI?

ALL indicators are made up of either a combination of
Open
Close
High
Low
Volume or open interest.

Many like Stochastic and MACD are telling exactly the same thing as their components are just the same.Like taking a bus or a car to the same destination its a matter of opinion as to which is most efficient.

I'm with Wave picker/Wayne in that I use Price action well above any indicator for entry signal and longerterm analysis.Fib and Elliot are excellent for short term levels.As a filter for mass segregation there is an application,as for setup in the long run if used properly only a 50/50 proposition --if used incorrectly far less---and traders wonder why.

See people think that a magical indicator or 5 or a positive Fundamental evaluation of a company guarentees success,when they dont get it CONSISTANTLY they blame their analysis.
Fact is they believe that their analysis if correct over 50% of the time guarentees success.

Yet I can prove that a 7/10 hit rate doesnt equate in some cases to success.
The method I use has a 35% success rate and is tremendously profitable.
Well over 30% compounded return.

I agree.

Price itself and where that price is relative to its historical position is important. Fibonacci would be the only indicator that can be used to forecast.
Money flow out of the averages I like.

[wayneL]

Hullo Wayne,
Just had to ask you about your use of CCI, I don't use this , I think its a tool for trading cyclical trends & trying to predict some sort of cycle of moving averages.
Its another osillator ! :)
What is it in your trading application ?please.

Regards Bob.

First lets looks at how the CCI is computed and what it measures

1/ Stage one is a simple price oscillator using typical price i.e

Typical price { (H+L+C)/3 } subtracted from an x day simple MA of the typical price

2/ The result is divided by the x day Mean Deviation. This basically corrects the above raw oscillator by a crude measure of volatility.

3/ Finally, the result is divided by a constant (0.015) which corrects the value of CCI so that ~70% falls between 100 and -100.

So what the CCI is, is a volatility corrected measurement of the TP in relation to it x day moving average.

It can be used as a measure of trend (as if you can't see it already)

It can show proximity of the price to its 20 day MA, and if price finds support there, by the CCI "rejecting" or "kissing" the 0 line.

Extreme values of > 200 or <-200 can suggest a regression to the mean, i.e. a counter trend trade.

Also can show divergences like any other oscillator

This is all subject to observations of the actual price movement. Best suited to swing trading IMO. You could just as easily use the 20DMA.

[Bobby]

Thanks Wayne,
Wow that was bloody good mate !.
You sure know your stuff.

But they suck when you lay down the $buck. (too often)

Regards Bob.

[tech/a]

Hmm no takers on stochastic?

Wayne has shown a powerful aspect of Oscillator analysis which is worth a look when analysing any chart particularly one in an on going move positive or negative.


DIVERGENCE.

[bullmarket]

Hi WayneL

:iagree: 100% with your earlier post where you said people should try to understand the maths behind the indicators they are using.

Below is a post and chart I made a while ago describing my understanding and usage of the Stochastic indicator and how some people can misuse/misinterpret the stochastic if they do not fully understand the maths/mechanics driving the indicator.

Sometimes I also 'calibrate' an indicator to match the historical price turning points as closely as possible thus giving a higher probability that any future buy/sell signals will be correct. But I wouldn't advise tinkering with indicator settings too far away from the defaults unless one understands the maths behind the indicator pretty well.

Finally, as I said earlier I go on price action first and then look to the indicators to hopefully confirm the price action. The indicators I described in my earlier post in this thread have served me well, as an investor, to help time buying points over the years.



The stochastic is basically a 'change of momentum' type indicator. It shows where the current close is, in percent, relative to the highest high minus the lowest low range of the last X days...eg if in the last 10 trading days a stock traded between 2.00 and 2.20 and the last close was 2.10 then the stochastic would read (2.10-2.00)/(2.20-2.00) = 50%......This value is typically called the %K (or fast line) on the stochastic display. The %D (or slow line) is simply a moving average of the %K line.

Buy/Sell Signals

BUY signals are given when the %K crosses above the %D line and when especially both are coming up from below the 'oversold' line.

SELL signals are given when the %K crosses below the %D line and when especially both are coming down from above the 'overbought' line

But be aware that the stochastic, like all indicators, can give false signals at times and so should not be used on its own but in conjunction with other indicators and/or chart patterns

What I see fairly often is that traders will often call a stock 'overbought' as soon as the stochastic reads above 75 (overbought line) when in reality it only may or may not be actually overbought at that stage. By the nature of how the stochastic is calculated (as shown above) an uptrending share price will consistantly read above 75 shortly after the uptrend has begun.

The chart below shows where the buy/sell signal points from the stochastic occur on the price chart. You can see that at points A1 and A2, where the stoch starts to read above 75, the stochastic then continues to read above 75 for a period of time while the share price continues to rise (and hence the stock is not actually overbought at all during this period) until the sell signal is generated later on. Only then is the share price actually overbought

You can see that traders who called the share price overbought at A1 and A2 and sold out would have missed out on significant profits.

So the moral of the story imo is: The sell signals is given when the %K crosses below the %D and preferably when both are coming down from above the overbought line, and not simply when the %K and %D lines reach 75 from below. The reverse applies for buy signals.

Food for thought and I hope this helps someone.

In this chart I have set %K = 10 days, %D = 5 days

cheers

bullmarket :)

[Prospector]

Hi prospector



geeeeeez.....you're hard to please :D $4 to $12 in 4 years = 31.6% pa compound return.........I'll take that any day :)

But I get the jist of what you're saying :sly:

btw.....in addition to my previous post, I always go on what the price action is saying first and then look to the indicators for confirmation hopefully. If the indicators confirm the price action then I am more confident my interpretation of the chart is likely to be correct. All indicators regardless of the settings one uses will give false signals occassionally.

cheers

bullmarket

ps....CSI NY is about to start....have a relaxing evening whoever is reading this :)


OK, time to brag a bit - well in my first 12 months I bought MBL at $32 and within a few months sold for $58. I bought into PDN maybe 18 months ago at 11c ( you can buy a lot of 11c shares) and still have them now valued at $3.80. Biota at 47cents 12 months ago and sold them at $2.25 a few months months later. COH bought in at $20.

OK, the PDN were my gamble shares but were bought after research and making predictions that happened to come true. My worst mistake - thinking that Reefton would do the same thing but only lost around $500 on that one.


So if I can do it, then it cant be that hard, can it? And yes, the price movement is maybe one of my first triggers too.

If you want action, I trust you are watching Prison Break tonight! Excellent stuff!

[tech/a]

Hmm sorry wrong glasses.

Sell signals should not be considered in any trend.
There is a case in this chart for ranging.However signals should ONLY be taken in the direction of the predominant trend.

Now as another exercise try using stochasic as a stand alone REALTIME indicator.

IE post a signal both with and against the predominant trend.
Out of 10 you'll find accuracy well below 50%

Using oscillators to confirm oscillators is crazy.
Try running a commentary similar to the above in REALTIME not hindsite.

Vastly different once price action is complete ofcourse the overlay of an indicator will appear flawless.

[tech/a]

Prospector.

Seems you have an ability few have.

Being able to hold winners and cull losers quickly.

100k parcel of PDN equates to $300K profit.

Years ago when doing Tech Analysis at Securities Institute one of the guys had bought 100,000 Davnet at 6c while he was on it to $7 (Think it went) he eventually sold at $4 not bad for a 26 yr old.

[bullmarket]

Hi Tech/a :)


Interesting.
Daily stochastic settings used for a weekly chart.

Hows that work?

if you look closely at my chart you will see there are 20 odd price bars (1 per day) for each month and so it is clearly a daily chart....so not sure what point you are trying to make.


bullmarket :)

[tech/a]

See above I'm clearly blind.

Point is now clearer.So are my glasses.

[bullmarket]

no problem tech/a :)


See above I'm clearly blind.

Point is now clearer.So are my glasses.

good luck in your endeavours :)

bullmarket

btw...I had to look below (not that it matters)....I have my thread settings set to display the last post at the top.

[Prospector]

Prospector.



100k parcel of PDN equates to $300K profit.

Years ago when doing Tech Analysis at Securities Institute one of the guys had bought 100,000 Davnet at 6c while he was on it to $7 (Think it went) he eventually sold at $4 not bad for a 26 yr old.


Ah, but I didnt have the confidence to buy that many shares! :( The profit was still good though! Now, I need to work on my confidence issues ;)

[bullmarket]

Continuing on with the theme that chartists should understand the maths behind indicators, below is a post I made on another chat site (I'm not allowed to mention it :rolleyes: ) describing my understanding of the maths/mechanics driving the MACD/MACD-H indicator.



If anyone is still having a problem trying to work out what the MACD is displaying and how it relates back to the price chart, maybe try this practical experiment to help visualise what is going on.

Firstly remember that the MACD line is simply just the difference between 2 moving averages (typically 12 and 26 days, but I use 5 and 15) eg....if on a certain date the 12 day MA is $3.50 and the 26 day MA is $3.40 then the value of the MACD line on that date will be +0.10. I'll discuss the MACD trigger line later.

To visualise 'the reality' of what this means, set up a chart with just the 12 and 26 day MA's on the price data and a MACD display. You will see that when the 12 day MA is above the 26 day MA the MACD line will be positive, when the 12 day MA is below the 26 day MA the MACD line will be negative and when the 12 day and the 26 day MA's are equal to each other (eg..cross over each other) the MACD line will be zero.

So assuming a buy/sell signal is given when 2 MA's cross over then the MACD line gives a buy signal when it crosses thru zero from below to reading a positive value. When this happens on the MACD line the 12 day MA on the price chart will be crossing over the 26 day MA from below it to above it. Vice versa applies for sell signals.

The 'trigger' line on a MACD display is simply a moving average of the MACD line (typically 9 days - I use 10 days).

The MACD-H is a histogram displaying the difference between the MACD line and its trigger line. When the MACD line is above the trigger line the MACD-H will be +ve and when it is below it will be -ve.

The basic purpose of the trigger line is to preempt the expectation that the MACD line will soon cross above zero from below and so give a buy signal.

So using the MACD line and trigger line combination, a buy signal is given when the MACD line crosses above the trigger line and the cross over occurs below zero. Vice Versa for sell signals.

Therefore when you see a MACD-H reading negative values but beginning to turn up, that indicates the MACD line is beginnng to head up back towards its trigger line. Some traders will see this as an 'early' buy signal in anticpation that the MACD line will continue to move up and cross the trigger line at which the MACD-H will read zero.

I hope all this makes sense, but if anyone would like to discuss further, just post away with any queries.

cheers

bullmarket

[tech/a]

Have a look at September sell signals for the CBA chart.

There are 5 false signals which according to your rule for sale would have been taken.So my point of being able to show perfect signals in hindsite I think becomes clearer.

The same applies to all oscillators.

Those signals (buy) taken with the predominant trend show a clearly better performance.

[wayneL]

Continuing on with the theme that chartists should understand the maths behind indicators, below is a post I made on another chat site (I'm not allowed to mention it :rolleyes: ) describing my understanding of the maths/mechanics driving the MACD/MACD-H indicator.

bullmarket

Good stuff Bull

I seen a tendency among noobs to sometimes to assighn more importance to the MACD than the price itself, as if MACD leads price.

Understanding the maths dispells that, 'onya!

Cheers

[bullmarket]

No problem wayneL ;)

Tech/a: if you interpret 5 false signals then that's fine....each to their own.

Personally, I see a clear buy signal late August and only 1 sell signal about 1/3 into September where both the %K and %D lines cross below the 'overbought' line. But as I mentioned earlier I go on price action first and then indicators and since the price action at that time in Sep showed that CBA was still in an uptrend I would interpret that sell signal from the stoch as being false and as an investor and in accordance with my plan I would not have sold at that time - but a trader may or may not have sold, each to their own. I then see a clear sell signal on the stoch in the 1st week of October.

Also, bear in mind that all indicators will give false signals on occasions (as I and others have mentioned before) and so no one indicator should be used in isolation imo especially given the fact that some indicators as a result of the maths driving them will work better in some cases than others.

cheers

bullmarket :)

[bullmarket]

For the sake of completeness I've added the 5 and 15 day EMA's (Exponential Moving Averages) and the MACD indicator to the CBA chart I posted earlier with the Stochastic indicator.

So hopefully my earlier post (without diagrams) describing the MACD indicator might become clearer.

So you can see on the chart below that the black MACD line simply plots the relative positions of the 5 and 15 day EMA's to each other on the price chart as per earlier post.

I've also displayed the buy/sell signals generated by the MACD for comparing to the relative positions of the buy/sell signals from the stochastic. Overall they are reasonably close together - but it is very unlikely any two indicators will give exactly the same buy/sell signals.

Hope this helps someone :)

bullmarket

[tech/a]

It is very simple to overlay a chart with indicators and show how well they have performed.

Thats because it HAS PERFORMED.

My point and one which only active traders who have tried to trade by indicator/s will know is that when trading off of signals in REALTIME the completeness and accuracy are far from that seen on a chart in hindsite.

As the whole idea of a site like this is to help those who are struggling with some issues that active traders know and understand,I will take your 3 indicators (or you can) and present 5 charts for analysis of a simple entry.

Incidently as no buy signals coincide when then in your veiw is it appropriate to enter/exit? After all 3 have signalled?

Happy to do the same with exits if you think the use of indicators for exit is appropriate.

For the sake of completeness.

[bullmarket]

Hi tech/a :)

Imo it's not in hindsight at all because at each of the buy/sell signals when they occured you obviously didn't have the price data for the future. So it then comes down to whether and/or how the chartist uses the signals according to his/her investment/trading plan and strategies.

Regarding trading/investing in real-time as you put it, I use only end of day data and look at charts either in the evening after the day's data is available for download or in the mornings. So for me personally as an investor, that is essentially looking at charts in real-time. I don't have any need for intraday data/charts.

All I have done in earlier posts is describe my understanding of the maths driving those 2 indicators and how I use them according to my strategies and objectives and they have served me well over the years as an investor.

If what I have desecribed is not applicable to your style of trading then so be it - I don't have a problem with that at all :) What I described earlier works for me and if it helps someone else all well and good and if it doesn't because they have different views or strategies then that is totally fine with me......trading/investing is very much a case of each to their own objectives, methods and risk tolerances :)

cheers

bullmarket :)

[tech/a]

An entry signal is an entry signal regardless of timeframe.
Exit will determine trade length.

I both invest as trade.

Back to my question.
When do you determine an entry to be confirmed---at what point with your oscillator selection and or price action would you take a signal.

Software will select the appropriate conditions and if you tell me what that is I will code it and as I said run some entries using EOD charts.

As for exit that can be determined at any time you wish.
Do you trade stops?
If not then I'll leave them out of the exercise.

[bullmarket]

tech/a


An entry signal is an entry signal regardless of timeframe.
Exit will determine trade length.

I both invest as trade.

Back to my question.
When do you determine an entry to be confirmed---at what point with your oscillator selection and or price action would you take a signal.

Software will select the appropriate conditions and if you tell me what that is I will code it and as I said run some entries using EOD charts.

As for exit that can be determined at any time you wish.
Do you trade stops?
If not then I'll leave them out of the exercise.

Now you're just asking me to repeat what I have already posted. If you look back at my posts in this and other threads you will see that I look at the price action first (ie....support/resistance/trend breaks preferably with volume support) to help determine entry points and then to the indicators that hopefully confirm what the price action is suggesting to me. More often than not the indicators confirm my interpretation of the price action but not always obviously :)

How someone determines signal confirmation is up to the individual and should be written into their plan....ie.....which indicators they will use and in what priority will they need to give buy/sell signals for confirmation) Imo most of the parameters for these criteria will depend on one's risk tolerances and so there is no single right answer for determining confirmation for buy/sell signals.

cheers

bullmarket :)

[tech/a]

How someone determines signal confirmation is up to the individual and should be written into their plan

Well thats exactly what I'm attempting to do determine YOUR signal.

So what your saying is that in the end your signal is discretionary.
It cant be quantified.--it changes--it may or may not be confirmed by your oscillator selection.

What you have described is as most traders take positions.
They have no idea of success rates simply a theory.
What you describe is to me a very dangerous way to place your money at risk. Thats exactly what your doing and you have no hope of quantifying it (the risk).

Now while I expect the hashed reply of 'If it doesnt suit your trading then good luck in your endeavors',my intentions was and always is to demonstrate what are sound trading practices, and the flaws in some theories presented here.
Demonstration gets the point across far better than pure statement.

Discretionary trading at best is Maverick style.
There is much talk about plans and I often see plans that are like jelly ---constantly changing.


Sound plans have statistics on entry exit,stops and position size variables so that when trading you KNOW wether what you are doing is within your results---reslts that determine profitability if you trade a particular plan.

A fluid plan without results to reference is nothing but theory---could be ----should be---maybe ----ought to be.

Anyway if it floats your boat and your happy with your results so be it.
If anyones un happy with their results and would like the discussion continued,Im happy to do so.

If I'm talking to myself and Bulldust then end of discussion.

[bullmarket]

Hi tech/a

For some reason your posts sound like I should be determining entries/exits and any other strategies whilst thinking like a trader.

I would have thought that my signature below each post and posts I have made on this site make it very clear that I am not a trader at all and that I am retired and invest with my #1 priority being income nowadays and not capital gains (although obviously any capital gains are welcomed if they occur:) )

Therefore my objectives and strategies are very much different to the vast majority in here who I suspect mostly see themselves as traders with cap gains as #1 priority and income as a second concern if at all.

My earlier posts in this thread made it very clear that what I was doing was simply describing with charts the maths behind the stochastic and MACD/MACD-H indicators and how I interpret buy/sell signals on them. I also said that indicators are not my main criteria for determining entry points and I go on price action first as I described broadly in earlier posts. I can't make that any clearer than I already have :) You will also see in other posts of mine that even before I look at charts I put a company through my fundamentals/valuation spreadsheet to see whether the chart is even worth looking at for me personally according to my objectives.

So if anything I have posted earlier in this thread or elsewhere is not applicable to your style of trading then that is fine - I don't have a problem with that at all. :) You are a trader and I am a retired investor with income as my #1 priority and so it's very likely we'll differ on various topics.

cheers

bullmarket :)

[happytrader]

I am very simplistic in my combo of indicatiors. Coloured pricebars and patterns are my thing. I might throw some secondary indicatiors in for effect but thats about it.

What really makes the difference to my bottom line is how quickly and consistently I can recognise and respond to a threat to my position.

Cheers
Happytrader.

[ducati916]

tech/a


Discretionary trading at best is Maverick style.
There is much talk about plans and I often see plans that are like jelly ---constantly changing.


Sound plans have statistics on entry exit,stops and position size variables so that when trading you KNOW wether what you are doing is within your results---reslts that determine profitability if you trade a particular plan.

I have a feeling we are going to see its in the numbers at any point.
Something along the lines of;


(1)Average Winning trade.
(2)Average losing Trade.
(3)Maximum consectuive losses.
(4)Average no trades/ (whatever----your timeframe).
(5)Average days/hrs in a winning trade.
(6)Average Days/hrs in a losing trade.
(7)Average positive risk reward ratio
(8)Max % drawdown (relative drawdown as against peak to valley).


(1) Stops keep you in the game.
(2) The closer the stops to your entry the more often youll be whipsawed.
(3) The further your stop is from your entry the more youll need to make on each trade.
(4) Testing (Mine do your own if you feel it necessary) shows that less than 20% of trades recover to profit from a greater than 8% decline from buy price.
(5) Approx 80% decline further than 8%.
(6) You should keep a trade report sheet on every trade so you can calculate.(After minimum of 50 trades.)

(A) Average width of stop.
(B) Average run of consecutive losers and winners (More on this later)
(C) Average trade win.

(7) If shorter term trading youll need tighter stops and a higher % of winners as your win will be only 1.5-3x your risk (Stop)
(8) If longer term trading you will have the luxury of wider stops,less winners but you must let your profits run.

And of course, my all time favorite, the Expectancy calculation
Where, (1+($profit/$loss)*(#wins/#losses) -1)

If you feel up to the discussion, I'll let you know why I think it carries fatal flaws within its construct.

jog on
d998

[tech/a]

Well actually I am both.Investor/trader.

I've had this discussion before about holding a portfolio for income only.

To just sit and take dividends without watching the price action of any stock in a portfolio may well give you a return at a (in some cases) massive cost to your portfolio capital albeit un realised until sale.

If your solely an investor reaping income why then do you comment on fields that you arent actively involved in?
Then when questioned run off with your disclaimer?

Happy thats only one part of the equation obviously the other part is your ability to hold those winners well past the accumulated small losses you accept when things turn pear shaped.

Duc I always love your discussions and we have had a few.
There must be a thread which you and I and others have been along this path on Reef.
Instead of re hashing it just provide the link.

I'll use one of bulldusts lines and say that this is what I have found to be most profitable and that which I currently use---well documented as you know.
Where we will always be at logger heads is my inclusion of open profits and your exclusion in your/my final results.

You also have your trading documented for explaination of your methodology---one of the few with the guts to do so.

[bullmarket]

hi tech/a :)


Well actually I am both.Investor/trader.

I've had this discussion before about holding a portfolio for income only.

To just sit and take dividends without watching the price action of any stock in a portfolio may well give you a return at a (in some cases) massive cost to your portfolio capital albeit un realised until sale.

If your solely an investor reaping income why then do you comment on fields that you arent actively involved in?
Then when questioned run off with your disclaimer?

Happy thats only one part of the equation obviously the other part is your ability to hold those winners well past the accumulated small losses you accept when things turn pear shaped.



no problem......I think you forget that I have consistantly suggested using stop losses to keep losses at a minimum and to protect profits for both traders and investors like myself :)

But if you want to believe my investment strategy is incurring large realised or unrealised losses then that is fine by me.....I posted once before that where people in a forum like this think I am on a scale ranging from bankrupt to Bill Gates is of no interest let alone consequence to me at all... :D

Re your question about my or anyone else commenting on something they are not active in, to me is showing your frustration....after all, I'm not involved (directly at least) in politics, sport and a host of other areas but I like everyone else is 100% entitled to comment on them if they wish.....the same applies to trading or whatever in shares.....

I could be wrong, (but I doubt it) ,your posts sound to me at least that you get very easily worked up and frustrated when someone posts something that although suits and works for them you don't necessarily agree with. Why not try and relax a bit and not take things so seriously ;)

In the mean time I will continue to post what I like when I like about any subject I like with no consideration at all for what you think of my posts..

Have a relaxing and pleasant evening :)

bullmarket

[tech/a]

But if you want to believe my investment strategy is incurring large realised or unrealised losses then that is fine by me.....I posted once before that where people in a forum like this think I am on a scale ranging from bankrupt to Bill Gates is of no interest let alone consequence to me at all... :D

The comment was/is general,only you know how you control you income producing investments.The comments were /are for those who have seen the conceprt discussed and may not have understood both the up and downside.


Re your question about my or anyone else commenting on something they are not active in, to me is showing your frustration....after all, I'm not involved (directly at least) in politics, sport and a host of other areas but I like everyone else is 100% entitled to comment on them if they wish.....the same applies to trading or whatever in shares.....

Having an opinion is fine.
I certaintly do get frustrated when you or anyone else makes un qualified "opinion" and present it as often as you do as a tried and true methodology particularly when you dont use it in trading.There are many here who are discretionary traders and many have some great wins---just as many find it difficult infact frustrating that they cannot find a consistently profitable method in the way they trade,even in a raging bullmarket.
There are good reasons for that.There are tried and proven ways to reverse that frustration and become consistantly profitable but it takes time and flawed theory isnt helping anyone.Anyone can have a spectacular return very few have a consistantly profitable way to trade.If they did they would be down at the bank borrowing all they could get at 8% and trading it at 20 to 100s of %.Some are trading their own super funds and as we get older as you know thats a very serious commitment.
Like you I have my method which works for me and its very similar to all those I know have a method which returns consistant profit.Other than Radge I'm yet to see a consistantly traded short term method trading stocks.
Might be out there but I havent seen it.Many here like me would love to see one demonstrated as thats what most here attempt to do. I'd just love to see one so that I could say that it can be done.In 12 yrs posting I'm yet to see one---other than Radges.


I could be wrong, (but I doubt it) ,your posts sound to me at least that you get very easily worked up and frustrated when someone posts something that although suits and works for them you don't necessarily agree with. Why not try and relax a bit and not take things so seriously ;)

Yes I can see where you may think that.Infact there are quite a few I have a great deal of respect for as I can see from their input that they are not working on theory.Many trade and invest differently to myself and those who are clearly leaders or innovators are easily identifiable and I have learnt much from their posts--as others have. Although I have trouble with some of the calls on the SPI thread,I have to admit that there is some good stuff posted there (Once you peel away the self congratulation,and Gann rubbish). Simple support and resistance level trading has seen some great trades.
Maybe I'm different to most in that seeing first hand is believing and the most educational.


In the mean time I will continue to post what I like when I like about any subject I like with no consideration at all for what you think of my posts..

Ofcourse you will.

[sam76]

I use a coin.

Heads - I'm in
Tails - I'm out

worked well so far....

:p:

[bullmarket]

Hi sam76


I use a coin.

Heads - I'm in
Tails - I'm out

worked well so far....

:p:


like it.......short and sweet and easy :D and ducati will probably be your friend with that system since he/she believes that charting has a 50/50 overall result in the long run ;) (just kiddin' ducati )

cheers

bullmarket

ps...have to go...Prison Break starts in a few mins :) have a nice evening whoever reads this :)

[sam76]

lol

prison break is my fav show at the moment.

that and American Dad...

[It's Snake Pliskin]

Does anyone use open interest? Maybe wayne can tell how it is used. :alien2:

[Phoenix]

I have a neural network model that i have traded in the past year. 80% Wins and 40%pa return. :cool: