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Old 12-28-2007, 08:47 AM   #1 (permalink)
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What Are the Best Indicators For Trading?


Received the below question on the InformedTrades.com trading blog which I have answered there but I thought I would also add a thread on the subject here in case anyone had any additional thoughts they would like to share on the subject. Below is the question and my thoughts.

The Question

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What are yr favorite indicators David? And can I be so nosy as to ask if you have tracked success rate?
Thanks tom
My Answer

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Hi Tom,

Thanks for the question. There are times when I have used all of the indicators that I cover in my video lessons on indicators but if I had to choose favorites I would say the stochastic and the ADX are my favorite. The stochastic because it gives a good picture of how overbought or oversold the market is and the ADX because when plotted with the +DMI and the -DMI it gives a good picture of the strength of the up forces in the market and the down forces in the market.

My opinion is that indicators should only be one part of any strategy so no I have not tracked the success rate of the indicators as they are used simply as a guide and not as buy and sell signals by themselves.
If anyone else has thoughts on what indicators work the best for them I would appreciate you sharing them with the community below.

Best Regards,
Dave

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Old 01-24-2008, 09:38 AM   #2 (permalink)
 
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Hi,

It's good to have favourites, but whatever you choose, it's also important to learn what makes the tool work. By that, I mean the underlying formulas, math etc.
This is so you can avoid colinearity of indicators - a fancy way of saying that it would be pointless using, say a stochastic and RSI on the same chart - their data/calculations are too similar - and so, would be apt to give similar signals.

My own personal indicators include a volatility stop (derived from ATR), a stochastic to show OB/OS areas, and CCI (with a long lookback 50 bars) to give a more statistical meaning to the chart. This is all done using volume bars (as opposed to standard bar/candle).

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Old 04-18-2008, 06:50 PM   #3 (permalink)
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MFI


I am using the MFI (60 min/14 periods) to trade high volume stocks which are less prone to intense news events (i.e., pharmaceuticals). Further, I tend to stay away from trading before and after earnings reports. Using the MFI in combination with the MACD has been pretty effective trading AXP, GE, MSFT, BA, TM, etc. I am a member of the 'keep it simple, stupid' camp.

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Old 04-21-2008, 10:39 AM   #4 (permalink)
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Originally Posted by Unregistered View Post
I am using the MFI (60 min/14 periods) to trade high volume stocks which are less prone to intense news events (i.e., pharmaceuticals). Further, I tend to stay away from trading before and after earnings reports. Using the MFI in combination with the MACD has been pretty effective trading AXP, GE, MSFT, BA, TM, etc. I am a member of the 'keep it simple, stupid' camp.

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Hi,

Thanks for the comment and for sharing. I am definitely with you on the KISS concept.

Best Regards,
Dave
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Old 08-27-2008, 10:00 PM   #5 (permalink)
 
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Where do you find the ADX indicator?


I checked on my platform and don't have that one. Just wondering, great lesson on ADX I just learned what it is and I like it.
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Old 08-28-2008, 02:40 PM   #6 (permalink)
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Hey Mars401,

Glad to hear from you.

Check and see if there is an indicator there that is called the Directional Movement Index (DMI). Sometimes analysis packages separate out the DMI and the ADX and sometimes they include them all as one indicator under the DMI.

Hope that helps. If there are any other questions or comments on this one please feel free to post as always.

Best Regards,
Dave
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Disclaimer: Trading is risky and can result in substantial financial loss. As always my posts are simply one traders opinion and should not be taken as trading advice. I am not a financial adviser so everyone please do their own analysis and take responsibility for their own trades.
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Old 08-28-2008, 11:22 PM   #7 (permalink)
 
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Old 08-29-2008, 11:31 AM   #8 (permalink)
 
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Thanks David...


but my MT4 Platform that I use through Crown Forex does not include the ADX or DMI as you mentioned, I'll keep searching also I've been wondering how come some people's stochastic indicator has the 2 horizontal lines indicating when the market is overbought and oversold, my stochastic chart just has the K and D lines but no horizontal lines above and below, does that make sense.

Thanks a ton.
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Old 08-29-2008, 04:20 PM   #9 (permalink)
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my pleasure. The lines on the stochastic are simply there to point out the 20 and the 80 level which most people associate with the indicator being oversold and overbought. While its nice to have the lines you don't really need them as the indicator should have the value denoted on the right hand side of the chart.

Best Regards,
Dave
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Old 08-29-2008, 09:31 PM   #10 (permalink)
 
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Quote:
....but my MT4 Platform that I use through Crown Forex does not include the ADX or DMI as you mentioned,..

I'm VERY surprised at that as all (I havent seen all of them though!) the MT4 brokers/platforms I've seen have it as a standard indicator.
The MT4 platforms I've seen call it the "Average Directional Movement Index".


Quote:
some people's stochastic indicator has the 2 horizontal lines indicating when the market is overbought and oversold, my stochastic chart just has the K and D lines but no horizontal lines above and below,
When you "drag" the indicator onto the chart, click the "levels" tab and you can then "add" what values, style, colour for the lines you want.



Good Luck and Trade Well.....
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