All indication are methematical interpretation of priceaction. To use the indicator you need to use its logic and the logic of the Creator of the indicator. The only truth in trading is: Nobody can succeed using someone else"s methodology. Simply becasue it is impossible to understand the methodology the same way the Creator of the methodology understands it. Same with indicators. The creator of an indicator coded some methodology. If you don't know the methodology you will fail.
There are two possible solutions in this case:
1) Don't use any indicators at all. Lots of pro traders do that. I know some guys that are trading profitably without ever using the charts!!! They base their decisions simply on price numbers that appear on the tape/table.
2) Create your own indicator that will describe your methodology. It will save you lots of time.
a.b
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@Alexander_Nikitin, It is wrong to say that all indicators are mathematical interpretation of price action because you could build indicators with the most heterogeneous data including, for example, fundamentals, social streams, and so on. That said, it is true, you must understand how an indicator works in order to exploit it to its full potential.
dinnersticks
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@a.b, Well one thing is for sure, and thats that most indicators are lagging indicators, Imo using one leading indicator with one or two lagging indicators can provide a great edge. Nice post !
myklfd
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@dinnersticks, sorry but by definition all indicators are, by definition, "lagging indicators" because the indicators used today use existing data or data that is old, it happened yesterday.
dinnersticks
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@myklfd, hey no need to appologize hehe, I understand where you are coming from, however I am a pitchfork trader and the pitchfork (medianline) is one of the few leading indicators out there. But feel free to disagree ofcourse! ^^
Rocketman
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@myklfd, Everything in life is either lagging or sagging. haha!
myklfd
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I use no indicators. I have been trading successfully for 5 years using only Elliott Wave :-)
myklfd
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@myklfd, ALL indicators that are available work on old data, i.e. information that has already been processed. You all need something that has the ability to predict which is not based on mathematical formulae using data that was generated yesterday
a.b
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@myklfd, great job then! :)
Be aware that you could build indicators with whatever data so it is not necessarily past-data only. That said, what's wrong with past data? Most predictive models in scientific research are based on past-data. Take also weather forecasting algorithms, they were developed on past-data and they are exceptionally good these days. Machine learning? Same thing, based on observation in order to become more accurate in the future.
This is just to say that I don't see any particular limitation in working with past-data indicators. Of course they must be well engineered.
AriefMaulana
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@myklfd, I use Elliott Wave and indicators too, but it's purposed for degree indication as said by Bill Williams' Chaos/profitunity. a.b explanation perfectly fit to me
There are two possible solutions in this case:
1) Don't use any indicators at all. Lots of pro traders do that. I know some guys that are trading profitably without ever using the charts!!! They base their decisions simply on price numbers that appear on the tape/table.
2) Create your own indicator that will describe your methodology. It will save you lots of time.