Indicators in Forex

Hello,

Referring to Edward's great thread,we here will discuss about indicators.

We have highly acclaimed doctors like Raunak, Edward, Columbus, Akit and so on.:clapping:Then there we are doing apprenticeship under those great doctors...........

Lets discuss freely, lets accept all opinions, lets respect what one says and also lets respect what works for one which may not work for the other.

We shall start posting what we observe, learn, hear and see possibly with charts.Our tiny effort is to add some value to what we do and nothing else.

all are welcome...................

Regards
Raghav

Hey Raghav,

Thanks for starting up a thread on Indicators.... a much needed one here in TJ... I think this thread has the potential to become a sticky thread for its sheer vastness in subject.

Somebody said, 'there is no limit to what we can achieve as a team if we are not bothered about who gets the credit'.

Just one request to all those who are good in indicators and systems... Let all contribution come to this thread in terms of indicators, instead of opening a new thread for an indi or two, this way we will have a centre space for indicators and their discussion, which will benefit the new comers in leaps and bounds.

Sarcasm is welcome, but no leg pulling I suppose, subtle sarcasm is fine, but the coarse one is too much to maintain a positive vibes...

So lets get Rocking....

The divergence in stochastic gave 40 pips. Also see the confluence of ED's average with Stoch.

http://yfrog.com/eqeurusd30thjulyg

Regards
Raghav

What is Divergence?

Understanding Indicators is not complete without understanding 'Divergence'.

So what is Divergence in a Layman's term?

Divergence simply put is the 'Variation' of the movements of an indicator when compared to the Price Action. Look at the picture that raghav has posted once again.



Just look at ... point 1 and 2 in the price chart and look at the corresponding points 1 and 2 in the indicator chart... Remember, divergence can be studied and used in any kind of oscillator, be it MACD, RSI, STocks etc...

Point 2 in the price action is way above the point 1 ... but the corresponding point two on stoch is lower than point one.... Conclusion, stochs do not agree with the price action, something is missing which is not seen in the Raw price action....

It's like the synchronised swimming.... if one lady is out of sync, be cautious... something is cooking.... bottomline, both the indi and our price action should be in sync... or else Divergence has occurred...

The one that you see here is called a Bearish divergence... invert the chart and you will get the Bullish divergence... this type of divergence are used to look out for a reversal.

The other type is the hidden divergence.... which helps us in determining the continuation of trend, more later... got a visitor... take care guys..

My little experience with indicators

No Disrespect to anyone in this thread (specially not Edward and his bandwagon) but i would like to express my opinion about some of these pretty lines (indicators) and some basic things that people should know who use them.

1. Most indicators look picture perfect in hindsight specially when price begins to move directionally after a signal is generated. But what about the number of times a signal is generated and price does exactly the opposite of the prior signal ? I hope some of these charts are presented here as well which shows the failure of a signal and then the profit potential of a reverse trade.

2. As almost everyone knows indicators lag by nature and are a function of price. That being said price is a function of volumes and volumes is a function of the flow of orders taking place in the market. So the users of these indicators are the last ones to arrive on the scene.

3. A signal is generated on pretty lines when there has been increase in activity in the market i.e Increase in volumes , price and volatility. I have yet to see a pretty line which generates a signal when volatility has contracted.

I am not in favor or against of indicators. I still use EMA(20) as a proxy for trend lines which is the only thing on my chart along with price and volumes ( Tick volumes are available in forex for those interested )

All i want to say is that use these indicators with some kind of model or method which factors in some variables of demand, supply and future expansion or contraction of volatility. This might just reduce the total number of trades but simultaneously it will increase the number of good quality trades. And the end of the day the juice should be worth the squeeze.

Hope This Helps

Cheers And Happy Trading

Yes Placebo,

Very correct,

Indicators is like a Tomato Sauce. Some like it to add it to food , some dont like it to add it in food.

Some use little to add in food.

So Indicators are like that, Some Add or some add little of it...Some dont like it.

So basically its our strategy and moneymanagement that matters.

I m an indicator fan and will never trade without that

______________________________

But it is always easy to tell, "Follow the Trend" or " Follow Money management "

The Question is " How to do that? When to that? And for some , What is that ?

its Difficult So Please If Anyone know how, then lighten it.

_________________________________

Re: My little experience with indicators

Dear Placebo, and friends with similar thought process,

First and foremost thing, just speak your mind here, nobody is going to get hurt for a school of philosophy... for a different perspective, ... at the least i am not...

There are two kinds of people who contribute to the Society, excuse me if I sound very plain, simple and laymanish, but that's how things are in my life. ..

The Conservatives & Puritans, second, the Moderates & progressives... which one is the best.... guess what... both are important for the society, we owe our heritage, culture and even language to the Puritans, the Conservatives... but the Moderates and progressives are the ones who brought the developments and removed the draconian way of life.... both have played a part, both are important...

It's like the spiritualist and the Materialist.... even the hardcore materialist kneels downs at times and the biggest spiritual healer pops a pill.... I will never be part of the 'Either Or' debate....

As your name suggests placebo... 'Placebo is all about belief and trust, it's not about the chemicals & research.... it's plainly about Belief'... what if we say there are a set of people who feel more comfortable looking at the MACD then just the bar chart... will he have the result or not... if you believe in Placebo, you have to believe in me.... The very id that you selected talks about 'subjectivity, about belief over facts, about mind over matter... and that's exactly is what Technical analysis... for me...

My system gives the Price action a face, a shape, what is invisible becomes visible to me... I can see how it's gonna react, I can try to predict how it will move.... no not because of the invisible, price action.. but because of the indicators I have... you have the liberty of saying that you onlly use a 20 ema and that's not a indicator... I can object and say, sorry sir, that's my indi, your candlestic high and lows are our contributions... but it will be in vain..

i said this before and will repeat, all surgeries and trials were done on a dead body, looking at the historical data is the most important thing.... the medical science survives on it.... even the Human history survives on it... the old adage says, ' History repeats itself' but nobody wants to learn... that's the point... we as technical analysts try to learn from the history.... as Solomon says, ' nothing is new under the sun'.

If you say, studying the history is futile, then everything is futile... in my career as a trader, I have tried everything.... and as my career as a trainer.... I have seen some amazing things.... its all about Belief in what you are doing... and nothing grants you that more than a system or strategy... and which invariably has an Indicator... you can call it 20 ema or whatever.... there is an indicator............. always....

Indicators for me are like glasses........... are they accurate ..... no never....... will they suffice............. sure........... but you need to believe and know the limitations.... that's what my Indicators are for me.... my glasses... and trust me I can't live without my glasses

Nice Edward.

:thumb:

lol

For a minute there i thought i was attending philosophy 101 and Drama 101. lol

Well from what it seems you really have made one hell of a misinterpretation of my previous post. Lets get a few things clarified now shall we

1. When did i say studying history is futile ?

2. When did i say EMA(20) is not an indicator ?

Indicators do generate results and i do not deny it. What i stated in the previous post was what Indicator Fanboys hide or perhaps do not know because they get so stuck up with the signal that they do not even try to find out the construction of these indicators or the underlying ideology behind it. Indicator users are more output oriented and do not understand the limitations that tag along.

I just laid out the facts on the table and anyone who reads this genuinely would have an opportunity to decide for himself/herself after seeing the pro's and con's of indicators. What is wrong in that ? Wouldn't that help in the decision making process ?

Kindly re-read the post if possible , maybe and just maybe you will see what i am saying.

Cheers And Happy Trading

Re: lol

Hi Placebo,

You think DUI is dangerous try 'Writing under Influence' :lol:

I was making a generic statement to the TA bashers.... may be I was caught up in the moment but the only answer people have against TA is, Price action, now if you ask them 90% of them have no idea what is price action and can't define it...

I completely agree with you on the 'Optimism Bias' that people have, particularly the Technical analyst group... I normally teach people to be honest with themselves, try to see the limitation of the system, the boundaries, the cirumstances where it will not work... the true, serious trader listens, the casual get rich quick guy doesn't....

The problem today again is the problem of extremes.... either you have people telling you that they believe in Price Action.... or you have people in who's chart you will have thousands of indicators, like a Boeing 747 cockpit...

If I ever make up my mind to do it, I will post few statements here of mine and my students, who use our full system.... 75 trades only 3 neg, 30 trades no neg, 27 trades 1 neg . . . some of them look like they are manipulated, I have seen statements of people selling ponzi robots, even they keep more negative trades to give a touch of genuinity compared to the statements of some of my students... and almost all of them are without any prior experience in trading... this has invariably driven me to believe in the effectiveness of indicators and TA in general...

To each his own, if I ever get so intuitive or expert in studying a naked chart.... I will be as passionate about 'price action' as I am about my indicators.... it's about what you have seen and experienced in life that defines your philosophy... for the time being.... I cant think of anything other my favorite indicators...