2012-08-29

TA Indicators

From Arthur - Snowrider, As you know, I have only started to read your posts recently, and am glad to learn that you do not use indicators. I am in a love-hate situation with indicators. I would like to get rid of them completely, however, they nevertheless give me some indication, even though, at times, they do not work at all, but which I have prepared for. Would you be happy to tell me your view point of indicators, and why you dislike them?  And how would you be able to notice divergence(s)?

I did started from using TA indicators, and I have played all indicators inside out before throwing them away.  I understand and know them too well so that I won't use them.  Given a TA indicator, you can ask yourself some simple questions about that indicator:

1. Do you know how to use it?
2. Do you know the formula (how it is calculated)?
3. Do you know the idea behind the formula (why it is designed that way)?
4. Do you know what timeframes that indicator work best with what parameter values?

Once you know the formula, have you thought about tweaking it a little bit or create your own formula?  Once you create your own formular (your own TA indicator), you might be wondering what the optimal parameter values for your indicator are?  At that moment, you might want to start playing system trading.  You will then write you own systems and start back-testing historical data.  In the end, you might succeed on that route - system trading.  However, I did not, so I threw away everything and went back to price action/behavior.  Please read more:

System Trading vs Elliott Wave (I, II, and III)

About the question of identifying divergence ... EW has some very good patterns for you to identify the end of a wave.  For example, the Ending Diagonal Triangle pattern will bring your TA indicators to divergence.  You don't need an indicator to tell you that because the chart already told you.

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