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

My Answer

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

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).

the seeker

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.

PM

Hi,

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

Best Regards,
Dave

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.

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.