Log in

Price action and technical indicators

imageThe price bar is an indicator, it is wrong to separate the price bars from the indicators.

 
A price bar is sampling the market action in a time period and is indicating:Open,High,Low,Close.
This is an indicator per se. The Japanese candle sticks offer particularly good representations.
 

As Protagoras says "man is the measure of all things". And from human perspective it is important when using discretionary analysis to use the same settings, only in that way you can train your mind with the market patterns.

 
Price bar they do not allow to change the settings inside your time horizon, and in that respect they allow human traders to train them-self to recognize patterns (according to their price action strategy).
 
Most newcomers when they use technical indicators they try to fine tune them on past market history and by doing this they do curve fitting and by this they do not train their mind to recognize patterns as they change the inputs all the time.
 
(System traders they also do back-testing but machine back testing is precise and they do precise walk forward optimizations trying to avoid data mining bias as much as they can, they use many other validating techniques to challenge their system).
 
On the other side it is a massive disease to see on public forums screens full of indicators, which settings are changing all the time.
 
And of course, the best technical analysis authors when they use indicators they do not change their settings. They use the same settings for years. For example the alligator of Bill Williams or the indicators of Dinapoli indicators set, or Elder, there are much examples.
 
The idea is to train the mind the relationship between the market and the indicator values on the most deep unconscious level by following same basic rules of logic.
And that can be achieved by human by looking at the same indicators again and again. It is advisable not to have much more than 3 indicators at all.

Comments

  • jaguar1637 1108 days ago

    //1) When the velocity of a signal is positive, wait for its acceleration to turn negative

    // 2) When the velocity of a signal is negative, wait for its acceleration to turn positive

    // good long entries can be made when balance velocity reaches a high positive value and is starting to decelerate down