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Originally Posted by TraderABC
What are indicators? ...
Fact: Indicators (such as RSI, roc, ma's, candles) NEVER predict, at best they show a CERTAIN aspect of price's action.
Fact: Many indicators are almost identical, and since they ALL look at the same data you could make a case that they all are virtually identical.
Fact: In order for a market to remain a market there MUST be a seller for each buyer. There must be a person that will be willing to take an opposite side of the trade. If everyone knows that "Oh the indicator XXX says that stock is over bought/sold so I only short/long it" then that pattern will not work out.
Decades ago people used to make a KILLING using moving averages. Try that today... I automaticly backtested DOZENS of moving average combination of 3+ years of data (the max my charting software allows for short term candles) and they all bombed if spread is taken into account.
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Agreed.Most indicators need to fail 20 % of the time to help a trader get into the 95% club of losers.
In trending markets most of these overbought/oversold/rsi/stochs indicators etc don't work or start to fail.
Markets become irrational and rationale/logic of indicators becomes useless.When the euro rose to 1.36 , a load of overbought indications were being thwarted at 1.28 and many traders did not join the trend at 1.28
El