Australian (ASX) Stock Market Forum

What combination of Technical Indicators to use...

Jump to new
borat

borat

Jagshemash!
Joined
30 November 2006
Posts
67
Reactions
0
Hi All...

An newbie here with some questions on indicators and there sense of usefulness. I have been reading up and experiementing on the most common used indicators in technical trading such as SMA, EMA, Stochastics, Volume + MA, Williams %R, ROC, RSI, Parabolics SAR and MACD.

Been looking at support and resistance levels as well. Looking and Double Tops, ottom, Head and Shoulders at t mo but I have to gather some experience to better understand these.

Using some of these together create some contradictions and does cause some confusion.

What do you find the best combinations and most reliable indicators in any particular market condition?

Thanks all...
 
I like the Money Flow Index (based on Chaikin Money Flow). It's a volume weighted indicator - WikiPedia explanation here.

Basically it returns a number from 0 to 100. 0-25 can be considered undervalued, 75-100 overvalued.

In my BHP example, everytime the blue line (MFI) dips below 25%, check out what happens to sp.
 

Attachments

  • plot.gif
    plot.gif
    40.6 KB · Views: 546
nizar said:
Price and volume.
Click to expand...

Yip, ditto, price and volume mostly.

I do use a 200ma on daily's, 30 ema on weeklys and i won't buy anything below them if i'm going long.

I also now use a 13 ema on a daily for a sell signal once in a while. If it goes below i sell.

I use a 21 ma on the volume. I also use slow Stochastics.
 
borat said:
Hi All...

An newbie here with some questions on indicators and there sense of usefulness. I have been reading up and experiementing on the most common used indicators in technical trading such as SMA, EMA, Stochastics, Volume + MA, Williams %R, ROC, RSI, Parabolics SAR and MACD.

Been looking at support and resistance levels as well. Looking and Double Tops, ottom, Head and Shoulders at t mo but I have to gather some experience to better understand these.

Using some of these together create some contradictions and does cause some confusion.

What do you find the best combinations and most reliable indicators in any particular market condition?

Thanks all...
Click to expand...

Don't forget "Cup and Handles"...my favorite patter at the moment!

Cheers,
 
mrWoodo said:
I like the Money Flow Index (based on Chaikin Money Flow). It's a volume weighted indicator - WikiPedia explanation here.

Basically it returns a number from 0 to 100. 0-25 can be considered undervalued, 75-100 overvalued.

In my BHP example, everytime the blue line (MFI) dips below 25%, check out what happens to sp.
Click to expand...

cheers Woodo, where could I get this indicator or it's formula? Wouldn't mind trying it out...
 
borat said:
Hi All...

An newbie here with some questions on indicators and there sense of usefulness. I have been reading up and experiementing on the most common used indicators in technical trading such as SMA, EMA, Stochastics, Volume + MA, Williams %R, ROC, RSI, Parabolics SAR and MACD.

Been looking at support and resistance levels as well. Looking and Double Tops, ottom, Head and Shoulders at t mo but I have to gather some experience to better understand these.

Using some of these together create some contradictions and does cause some confusion.

What do you find the best combinations and most reliable indicators in any particular market condition?

Thanks all...
Click to expand...
1 oscillator is all you need- RSI, Stoch, Williams %R, pick one, whichever you like best. It doesn't really matter, they all do basically the same thing. Most of the time, the main benefit to these is finding divergence. Never, ever have more than one of these on your chart.

Wouldn't touch the SAR with a 10 foot pole- the most useless thing I've ever seen- it's only useful when the market takes off like a rocket, and even then, all it will tell you is that the market took off like a rocket :banghead:

Haven't played around with volume indicators much- volume alone does the job.

SMA's can be brilliant tools when you know how to use them properly-and looking for MA crossovers isn't always the best way to use them.

What ever you choose to use, make sure you understand the basics of price action as well. Alot of people new to the game think that an indicator will tell them all they need to know. It won't. When you really get to know certain indicators, and know how they relate to the price action, then you'll be in a good situation to be able to profit from them.
 
professor_frink said:
1 oscillator is all you need- RSI, Stoch, Williams %R, pick one, whichever you like best. It doesn't really matter, they all do basically the same thing. Most of the time, the main benefit to these is finding divergence. Never, ever have more than one of these on your chart.

Wouldn't touch the SAR with a 10 foot pole- the most useless thing I've ever seen- it's only useful when the market takes off like a rocket, and even then, all it will tell you is that the market took off like a rocket :banghead:

Haven't played around with volume indicators much- volume alone does the job.

SMA's can be brilliant tools when you know how to use them properly-and looking for MA crossovers isn't always the best way to use them.

What ever you choose to use, make sure you understand the basics of price action as well. Alot of people new to the game think that an indicator will tell them all they need to know. It won't. When you really get to know certain indicators, and know how they relate to the price action, then you'll be in a good situation to be able to profit from them.
Click to expand...

Cheers Frink, read same comments about SAR so think i'll leave it out to avoid confusing myself... I have put together, SMA ( 15 ,45,100 ) Bollinger, MACD, MFI, RSI and Volume + MA... Going to dable a bit with stochastics later on, once I understand the above mentioned. I think I have a long way to go with understanding price action, probably the greatest indicator of em all...

thanks...

B.
 
borat said:
Cheers Frink, read same comments about SAR so think i'll leave it out to avoid confusing myself... I have put together, SMA ( 15 ,45,100 ) Bollinger, MACD, MFI, RSI and Volume + MA... Going to dable a bit with stochastics later on, once I understand the above mentioned. I think I have a long way to go with understanding price action, probably the greatest indicator of em all...

thanks...

B.
Click to expand...
By using MA's and an MACD, you have 2 different indicators- MA's(smoothed out price action) and more MA's(with additional smoothing). Prob don't need both.
What can the MACD tell you that an MA won't? These are the sorts of questions you should ask yourself before you use any of them.

If you have an RSI, you won't need the stochastics-they measure the same thing(momentum), just in different ways.

Just out of curiousity, why 15,45 and 100 for your moving averages?
 
professor_frink said:
Just out of curiousity, why 15,45 and 100 for your moving averages?
Click to expand...
They were the out of the box parameters... Other suggestions? open to comments....
 
borat said:
They were the out of the box parameters... Other suggestions? open to comments....
Click to expand...
All depends on your timeframe, and what you want to achieve.
Personally, I think an MA over a very short timeframe(anywhere from 4-8 days) can tell you alot about the immediate trend. This combined with others of longer timeframes(such as what you already have) can give you a good overall picture of what the stock has been up to.

The best advice I can give in regards to indicators, is find a couple that you like that don't say the same thing in different ways, then put them up on as many charts as you can find, and then you can find out what kind of timeframes,settings you want to go for.
Questions you should be asking yourself when doing this-
What is this indicator telling me at turning points in the stock?
How is it relating to price action?
What is the price action telling me that the indicator isn't?
When do these relationships show up in the stock at other times, when the stock doesn't reverse?
Where is the most appropriate place to put my stop when I get a signal from these types of setups?
 
cheers frink, will go through your comments and suggestions on my current and watchlist stocks and drill myself on what I'm doing and what I should be looking for...
 
borat said:
cheers frink, will go through your comments and suggestions on my current and watchlist stocks and drill myself on what I'm doing and what I should be looking for...
Click to expand...
No worries mate. Only just noticed that you have Amibroker- you can do some testing to figure out how well these kinds of things work. It could be worth looking into as well.
 
professor_frink said:
No worries mate. Only just noticed that you have Amibroker- you can do some testing to figure out how well these kinds of things work. It could be worth looking into as well.
Click to expand...
Yeah, I have been exploring the charting formulas that are packageed and setting up a few combinations to work with, still working out how to use the app effectively as well so getting double the education...
 
borat said:
Yeah, I have been exploring the charting formulas that are packageed and setting up a few combinations to work with, still working out how to use the app effectively as well so getting double the education...
Click to expand...
Yeah it's all good fun. I've had Ami for 12 months now, and I'm still learning about it all the time. It's worth the time to learn as much as you can about it though.
And if you run into problems, there are a fair few people on ASF that have it, and can help you out if you ask nicely :)
 
borat said:
Hi All...
Using some of these together create some contradictions and does cause some confusion.

What do you find the best combinations and most reliable indicators in any particular market condition?

Thanks all...
Click to expand...
Borat
How do you determine usefulness? I can only assume by thorough back-testing of each parameter, although this is difficult to code on H&S etc.

I probably would go for as few as possible. Don't get bogged down in the multitude of indicators - there is a lot of similarities between many indicators. Things like stochastics, williams %R, MACD and RSI can be used but they are nothing special.

Everything I mention below relates more to long term trading using weekly charts.

For entry signals I use fairly simple strategies on weekly charts, such as the close > open, the volume is above average, and the price is X% higher than it was X weeks ago (ie ROC or momentum). You might look for a close above recent highs or the Bollinger Band breakout approach mentioned elsewhere on this forum or on my blog.

For exits just use a trailing stop, such as moving average on the lows or a close below recent lows. Use a ratchet on the lowest lows approach as I have done on ERG chart on my blog so the exit point (stop) doesn't drop before the exit is signalled. An ATR based trailing stop is also quite good. Exit on EOW signals only.

The above basically outlines a simple long term trading system, although I will leave it to you to put it together if you want to go this route. It isn't that hard to build them, it's another thing to believe in them enough to trade them!

Stevo
www.drawdown.blogspot.com
 

Similar threads

tech/a
An Introduction to Technical Analysis of Stock Charts
2 3
Replies
47
Views
22K
fiftyeight
fiftyeight
Top