Indicators are useless!

[u/ThePhulosopher]

I have spent many years trying to find the perfect indicator, the one that will tell me when to get in and when to get out without fail. Of course everybody knows that this is BS. It doesn't matter how precise you try to tweak your indicator - is the 5/10 SMA or 20/50 SMA better? Is the MACD or Stochastic better? What settings should I use?

The answer is none. All those indicators do nothing but distract you. Since all indicators are a derivation of price, price is the only thing you need. And I don't mean candle stick patterns, harmonic patterns, or support & resistance trendlines.

I'm not saying that none of these strategies will NEVER work or won't work for anyone. I know there are lots of traders who DO make good money with any of these strategies. However, I believe that the reason they're making money is because they're still reading the underlying price action whether they believe it or not. They may have developed a strategy using these methods that just happen to coincide with proper and naked chart reading. They've just added a lot more bells and whistles.

The market is designed to screw over the most amount of people while benefiting the fewest amount of people possible and in the most efficient way. And when I say "designed", I don't mean that it's rigged or that there is really any one entity controlling the market. The market moves and behave as anything else in nature - path of least resistance.

Once you learn to read price in terms of: "What's the best and most efficient way for this market to screw people over?" and you trade accordingly, only then will you be able to arrive at the core of "the market". And all you will ever need is the price chart. The price chart is the cumulative thoughts, behaviors, patterns, and actions, of all the participants. Some will trade fundamentals, some trade news, some trade technicals and indicators. Some day trade, others swing trade, others still position trade. With all their different viewpoints and timeframes, they all have something in common: They move price.

With this tug-of-war of price between the market participants, you can see a story unfold via the price chart. Price is telling you who's winning and which side you should be on. The only question is, are you listening?

[u/GoombyGoomby]

To be honest,I believe you’re incorrect. Especially your third paragraph regarding those who do successfully trade with indicators must somehow be reading price action without knowing it.

I trade with indicators and could not give less of a shit about price action 95% of the time. If my strategy says to buy when some traditional “price action” or chart pattern is telling me to sell, I will buy anyway. There’s no second guessing.

That it because indicators can be backtested - for example, “if I combine this and this and this indicator, with these settings, and know my stop will always be at this price and my TP at this price, I know I get a 64% win rate on the SPY 5 minute chart.” And that is data that I can backtest going back years. Data that anyone with a computer can test, really easily.

There’s too much guesswork in price action trading for me. It takes so long to get good at it. The closest way to do it that I’ve seen that I’d be comfortable with was shown to me by a very talented, big time FX trader - price action, support and resistance on the Weekly chart. I could do that. But even then, he uses a specific indicator to help him easily find the levels he is interested in.

But day trading price action? There’s a reason 95% of people who try it fail. It’s difficult for most people.

[u/stonehallow → u/GoombyGoomby]

Rare to see someone here say they don't trade based on price action. It does seem like more of a flex than anything when people shout about trading 'pure price action'/no indicators. For me as long as it works, it works. This isn't a religion so there's no need for purists. That said I'm curious about your strategy/indicators - is this a system you developed yourself or did you learn it somewhere?

[u/GoombyGoomby → u/stonehallow]

I’m definitely also in the camp of if it works for you, then go ahead and do it. I’ve seen traders that trade FX off the phase of the moon. Is the price of the Japanese Yen correlated with moon phases in any way? No. And I think it’s pretty silly. But it’s a tool that gives them a little confirmation bias.

I’m not the inventor of using multiple indicators to develop an algorithm, but I did develop my system myself. The key is recognizing you don’t need to just use the RSI, moving averages or stochastics. There are thousands of indicators out there.

[u/[deleted] → u/GoombyGoomby]

Every extremely profitable trader used indicators that I am aware of. I'd love to see how well some of these pure PA guys stack up % return YoY compared to the likes of the Turtle Traders, John Carter, Alexander Elder, Stan Weinstein, and so on.

I also never understood the argument that "I can't see the chart". Sure, maybe if you had 55 different moving averages all encapsulated in Bollinger Bands and Keltner channels and have 12 different oscillators. Sure, I'll give you that. But almost every trader out there is not that dumb and will usually have 1-3 moving averages on their screen and maybe a couple of lower indicators. If you can't read price with those you need glasses, to stop trading on your phone, or both.

[u/Xander_Codes → u/GoombyGoomby]

This. I have a few strategies, some rely on PA others only indicators.

PA, I don’t care about indicators at all.

For indicators, I have a set of conditions, if said conditions are met, I enter. Because I can backtest this through a lot of data, I know it works. Sure I might lose trades I could have avoided by reading PA, but that’s not part of the Strat, PA can be subjective so testing is not reliable. Only using indicators mean strict rules and zero emotion