De-Constructing Indicators

tech/a said:

Timeframe/Pattern/Place/Range/Volume/[Divergence]/Anticipation

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Tech/A,

Can you expand on those elements in BOLD? ... Maybe with an example?


Thanks....

CFD said:

Price and volume yes, but if you take the view that you are only going to trade with the trend, then you need to be consistent in the way you identify the trend.

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Doesn't this kind of go against the theories to do with hedging?

Participating and potentially profiting from a short term trend, whilst at the same time participating and potentially profiting in a larger trend, that you would still be in regardless?

Chorlton said:

I agree, and in those circumstances, I would personally use an indicator (ie MA) for convenience.

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Indicators definitely DO have uses.

What I was hoping to achieve was to get people to understand exactly what they are measuring. In so doing, I have personally found that they diminish in importance and become a tool for convenience (as per your point above) rather than the first point of reference.

For instance when I do market scans for trading prospects, it is more convenient to use indicators than trying to code price patterns. Once I have a small universe of prospects, it is back to price.

A few visual "aids" definitely help define the analysis... MAs, trendlines, support and resistance levels etc.

It is all a visual thing.

buckylegs said:

Any chance of de-constructing more in the future?
Scotty

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I reckon the best way is to do the work yourselves.

Here is a source for all the mathematical formulas for indicators:

http://www.fmlabs.com/reference/default.htm?url=ADX.htm

With this, you can rip off the wings, pull off the legs, open up the guts and see inside any indicator.

Open up discussion on any indicator here.

Cheers