Indicators Vs Price action - or both?
تم تحديثه
Many new traders face a magnitude of problems early in their trading journey. One of the biggest dilemmas is caused by the vast amount of indicators available. There are the free basic indicators like RSI, MACD, Bolli Bands and the list goes on. Then you have custom indicators - Paid for, free trails - each offering their own edge.
The issue is not what they can or can't do - it's more bout how they are used, even why they are used.
I put together the tutorial mostly to show what each of the basic & some custom indicators show on the same chart - at the same time.
The idea was to highlight what they can spot and compare it side by side with price action. Also using still simple methods but not automatically drawn indicators such as Elliott and Wyckoff Schematics.
Over the last 20 years, I have collected around 14Gb's worth of PDF's, MT4 indicators, expert advisors, BOTS n all sorts. I play with them and revert back to the old faithful.
PRICE
Take a look at this first chart. A simple RSI indicator that can help identify a shift in the trend.
This is not a strategy - it's a simple "spot the move"
This type of basic understanding of what a lagging indicator is telling you can actually be beneficial. But not necessary.
The next chart shows a simple MACD & this time it can help identify the major (3) move of an Elliott wave move.
From here - take a look at simple Bollinger Bands.
What you will notice above, is that the Mean of the bands matches the Wyckoff Average price. Obviously oscillating a little as the settings are off the shelf. But you get the point.
If we shift to a Parabolic SAR - you can see within the Wyckoff Range of Distribution, the SAR is narrowing almost making a type of sideways Christmas tree.
Below we have a basic Stochastic - this where I have the yellow line shows newfound weakness in the trend.
Elliott Theory
Move away from indicators and you can see an Elliott wave which is actually a 5 wave move within the 2-3 wave move on a bigger timeframe.
This move can be measured and sometimes forecasted by using simple Fibonacci tools - you will see from this chart below, the move was straight to the 50-618 range; sometimes referred to as the "Golden Zone".
**Measure taken from the swing X to 1 of the impulsive move.**
What goes up, must come down. This move was then followed by a simple A,B,C formation in accordance with the Elliott Theory.
Jump forward a little and using Fibonacci again.
What you can see here, is that the Fibs from X - 5 (Major move) is now heading down to the 61.8% level.
Other Tools
Heiken Ashi - is another popular tool. Although it's replacing regular candles, bars or lines it basically takes an average and cuts out the noise. (this is not to educate as to how each indicator works) more highlighting how they can be used in simple terms.
What you will notice in the chart above - Is again, the level of respect the Average Price receives within the range. Without the noise.
Custom Indicators
As I mentioned above, there are thousands of indicators that come in all shapes, sizes and colors. As well as price ranges from free to thousands of dollars a month.
Here's an example of how a custom indicator can be built to help traders identify key levels or potential shifts in the market.
This indicator looks for the Mean Reversion as well as highlights a curved regression. As price is always trying to move towards its average you can calculate levels of potential reversals based on a load of tools including zones, pivots, or moving avergae touches for example. Again too many to list.
This next indicator shows two key areas of interest. Imbalance candles and Order Block levels.
There are methods to paint supply and demand zones.
These types of levels can be spotted (with experience) on naked price charts.
Another tool could be used to measure the strength of a currency or stock. For this, we have a simple Strength index calculation.
Showing the shift of power from AUD to USD during the range phase.
Conclusion
Regardless of the tools and indicators, bots n algo's - Price is still king of the market and all else is designed to measure it.
As I said, this post is not to teach anyone how to select or use an indicator - but to highlight how some of these things fit into painting or at least helping to paint a path that price will travel.
I hope this helps - please feel free to comment and question below.
Safe Trading!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
The issue is not what they can or can't do - it's more bout how they are used, even why they are used.
I put together the tutorial mostly to show what each of the basic & some custom indicators show on the same chart - at the same time.
The idea was to highlight what they can spot and compare it side by side with price action. Also using still simple methods but not automatically drawn indicators such as Elliott and Wyckoff Schematics.
Over the last 20 years, I have collected around 14Gb's worth of PDF's, MT4 indicators, expert advisors, BOTS n all sorts. I play with them and revert back to the old faithful.
PRICE
Take a look at this first chart. A simple RSI indicator that can help identify a shift in the trend.
This is not a strategy - it's a simple "spot the move"
This type of basic understanding of what a lagging indicator is telling you can actually be beneficial. But not necessary.
The next chart shows a simple MACD & this time it can help identify the major (3) move of an Elliott wave move.
From here - take a look at simple Bollinger Bands.
What you will notice above, is that the Mean of the bands matches the Wyckoff Average price. Obviously oscillating a little as the settings are off the shelf. But you get the point.
If we shift to a Parabolic SAR - you can see within the Wyckoff Range of Distribution, the SAR is narrowing almost making a type of sideways Christmas tree.
Below we have a basic Stochastic - this where I have the yellow line shows newfound weakness in the trend.
Elliott Theory
Move away from indicators and you can see an Elliott wave which is actually a 5 wave move within the 2-3 wave move on a bigger timeframe.
This move can be measured and sometimes forecasted by using simple Fibonacci tools - you will see from this chart below, the move was straight to the 50-618 range; sometimes referred to as the "Golden Zone".
**Measure taken from the swing X to 1 of the impulsive move.**
What goes up, must come down. This move was then followed by a simple A,B,C formation in accordance with the Elliott Theory.
Jump forward a little and using Fibonacci again.
What you can see here, is that the Fibs from X - 5 (Major move) is now heading down to the 61.8% level.
Other Tools
Heiken Ashi - is another popular tool. Although it's replacing regular candles, bars or lines it basically takes an average and cuts out the noise. (this is not to educate as to how each indicator works) more highlighting how they can be used in simple terms.
What you will notice in the chart above - Is again, the level of respect the Average Price receives within the range. Without the noise.
Custom Indicators
As I mentioned above, there are thousands of indicators that come in all shapes, sizes and colors. As well as price ranges from free to thousands of dollars a month.
Here's an example of how a custom indicator can be built to help traders identify key levels or potential shifts in the market.
This indicator looks for the Mean Reversion as well as highlights a curved regression. As price is always trying to move towards its average you can calculate levels of potential reversals based on a load of tools including zones, pivots, or moving avergae touches for example. Again too many to list.
This next indicator shows two key areas of interest. Imbalance candles and Order Block levels.
There are methods to paint supply and demand zones.
These types of levels can be spotted (with experience) on naked price charts.
Another tool could be used to measure the strength of a currency or stock. For this, we have a simple Strength index calculation.
Showing the shift of power from AUD to USD during the range phase.
Conclusion
Regardless of the tools and indicators, bots n algo's - Price is still king of the market and all else is designed to measure it.
As I said, this post is not to teach anyone how to select or use an indicator - but to highlight how some of these things fit into painting or at least helping to paint a path that price will travel.
I hope this helps - please feel free to comment and question below.
Safe Trading!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
ملاحظة
Bottom line is - Although the market is technical, it moves on emotions. Humans and the mindset is what makes things like key levels obvious.
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