Whenever I see people on forums endlessly discussing whether or not to use indicators, I always think of this old ad campaign:
Without spending much time on it, I’ve at least made attempts to explain this here and here and here.
I’ve even seen traders criticize each other on forums for their choice of chart background color! And, they were seriously trying to be helpful, which either makes this post more funny or more sad. I can’t say which.
I think people get caught up in the details because (1) they have easy control over them and (2) they can form cliques around their irrelevant choices. I guess it’s more fun to lose money if you have a bunch of other zealots to pal around with :-) More seriously, it gives them something to divert their attention from the scary fact that they have no idea what they are doing, and don’t know how to “fix” it.
Don’t get caught up in this BS. If you want to be a great basketball player, put on some comfortable shoes and practice. Don’t spend all your time shopping for the pair of shoes that will make you a star.
“and don’t know how to “fix” it.”
That’s the absolute truth right there. Hits me where I live, too.
Uh oh. It took me 15 years to become a good baskbetball player.
I would agree, but at the same time indicators can “indicate” certain things that don’t appear in price. Maybe i am incorrect about that, but if I am please clarify for me. For example, what about divergences? Some believe in them and some don’t. Without something to compare price against we can’t see a divergence. True or not? Richard, didn’t you recently do something on cumulative delta? One can’t see the affects volume or volume delta may have on price without some type of indicator. So, lets say that indicators are useful. Then it comes down to which ones to use and how.
Using basketball and shoes is not a good analogy in my opinion. Yes, i agree the shoes don’t really matter and practice does. In basketball you can practice dribbling, shooting, passing, defense, rebounding etc. How does one practice trading? Just trade on SIM? Trade how? Just enter and exit? So, if we are supposed to skip shopping for shoes in order to look good and think it will make us good and just practice what do you suggest doing in regards to trading. Its easy to say we don’t know what the market is trying to tell us. Its easy to say we don’t know how the market works. How about some enlightenment then.
I admit that I’m not a good trader. I’ve done all the things that new traders do. I’ve purchased thousands of dollars of indicators. I’ve paid thousands for courses. I’ve changed what method I’m going to use. I’ve tried just using volume and price and pivots. I really don’t know what to do. If indicators are not that path to success than what is? What should be on the chart and what should we be looking for and how do we take advantage of those things? How does the market work? Is it a dual auction or not?
Thanks
David
By the way, I know it all starts between the ears, but beyond that there must be other things that come into play.
You say “how about some enlightenment, then,” and that’s the crux of the issue right there. That’s the perfect word, even, because you probably realize that no one can give you a spiritual enlightenment. It’s something you attain by yourself, at best with some help. But we need not stick with spiritual examples. Any mundane skill will do:
It’s like if this were a website about juggling… I can provide some guidelines and ideas, but in the end there aren’t words I can write for you that will make you a juggler. The best instruction available still leaves you feeling awkward the first time you start tossing things in the air. All that’s left to do is practice. You have to bridge the gap between concepts (transferrable through language) and skills (only gained through experience).
So, actually, to go back to the basketball analogy that you don’t like: my suggestion really is to just put on a comfortable pair of shoes (a chart that appeals to you based on the concepts you know so far), and practice the game (trade in SIM). The point of my post is that the exact chart doesn’t matter so much as the time spent using it. Surely you’ve read about an approach that appeals to you? Try it, and try it consistently. In other words, don’t mess with the settings every loss you take. The data you are looking at will never be perfect, so give up on finding the perfect signals for now. Learn how to interpret a consistent set of signals.
Replay data is your friend. Trade the day, then re-trade it, then re-trade it, until you can see where you need to handle things differently. Try to get into the mindset that it’s the real deal, and feel what it’s like when the trade is underwater. Learn how to take a loss like a pro, and ride a winner like a pro (I’m personally still working on that one!).
The more localized indicators you look at, the more you realize that they really aren’t that different. Some are built on more sophisticated math than others, but they all have their limitations and you might as well assume that _none_ of them are predictive. So you’re going to have to figure out how to spot and exploit market conditions that are ripe for big moves, and then you’re going to have to figure out how not to let the market shake you out too early, while somehow keeping your average loss small.
At some point, you may realize that the path you started down isn’t for you (think of it as wearing out your shoes), and you’ll need to find another one. With experience under your belt, you’ll be able to make an even better choice for your next setup.
Know that, like any dream job with a low barrier to entry, most will not succeed. There’s a real success bias at work here, because you never see all the failures, while the successes get notoriety. Like, you see lots of movie stars in hollywood, but you don’t see that there are 100 waitresses never getting picked at auditions for every success story (I made up the statistic but you get the idea). So, don’t expect it to be easy, or for anyone to be able to hand you the answer key. If it were like that, there’d be a whole lot more daytraders and a whole lot fewer people stuck in a cubicle they hate. Life just isn’t like that.
Richard,
Thanks for the reply. I appreciate you not taking my comments as argumentative. After re-reading what i wrote i could see how it could be taken that way. My frustration comes through in what I’m writing. The analogy about the movie starts in Hollywood and the many that never make it in that industry was a good one.
I want the answer key! :-) I guess if it were that easy then everybody would be doing it.
David
David, don’t worry… the people that are truly argumentative aren’t usually self-aware enough to notice that they might have been.
What can and can’t be taught in trading is something I’ve been thinking about a lot lately. I’m not sure exactly where I stand on the issue. It’s tricky and complicated, because to the extent that something is common knowledge, the market changes to remove the edge. At least, I think it probably does. That’s just part of the confusion, when people think there must be an answer that can be distributed to them it a book or a blog.
Richard, have you read any of Don Miller’s blog? I have found it quite encouraging. I am sure that he believes in the value of legitimate trading education. I don’t think that he is concerned about losing his “edge” by teaching others. His posts during this past week have been especially interesting as he searches for a way to take his trading to the next “level”.
Mahlon
I used to read it but I don’t anymore. If it’s gotten better maybe I’ll try it out again. I’m sure he believes in education too, since he charges like $10k for his brand of “legitimate” education :-) LOL No doubt it’s valuable to have immersion-style access to a very good trader, but I am equally sure that no edge was transferred. So, he’s not losing anything by helping people out, since there is no recipe for what he does. Marty Schwartz, in his book, is equaly sure, as he explains he can give you all of his tools and you won’t make a dime with them.
“What can and can’t be taught in trading is something I’ve been thinking about a lot lately.”
Richard, I am all ears to hear what you have to say further on this topic.
I would agree that just taking a few indicators or chart setups from another person will not necesarily make one successful. Is it that person’s intuition that we are trying to get a hold of? How do we learn intuition? Or is this something that we have to fully experience ourselves?
What can we learn from other professions? Take a surgeon for instance. He spends many years in med school learning basics and principles. He puts in some hands on time to actually become a doctor. Then there is more advanced training and finally after some more practice he becomes a surgeon. During this time he is constantly learning from others by observation and being a team player. He also is learning from his own experiences.
So, how does one become a great trader? In a previous reply you talked about practice. This is good, but if there could somehow be some input from a true professional – coach – I am thinking it could be very beneficial. Back to your juggling example – “throw it like this”, “don’t catch it with 3 fingers, but 2″, etc. – specific feedback given on your performance right at the time that it’s happening.
I am thinking that this coach/teacher/mentor must have complete integrity and complete transparency – nothing held back, no selfish motives.
Enough rambling for tonight! Anxious to hear more from you.
Mahlon
I agree with you completely, Mahlon. That’s why I put together the team, actually. To (1) encourage people to practice in an open accountable way by doing so myself, and (2) to give them feedback (”throw it like this”), along with the other more experienced traders. And for a nominal price.
I believe it’s practically an epidemic, at least in america. Everyone reading how-to books on how to live their lives, and not actually living their lives. People need to get their hands dirty and stop waiting for someone else to spoon feed them the answers. So, that’s my soap-box. I think, if you can afford it and are ready for it, an expensive class like Don’s where you get full immersion is a fantastic deal… just don’t expect to come out of it trading like Don. Even he said he’s not trying to make clones of himself. No matter who it’s with, or how much you pay, no one can hand you the keys to the kingdom. A ton of the outcome entirely depends on you.
Here is a link to a great free seminar by Linda Rashke
http://s3.amazonaws.com/LBRSharedFiles/Mental_Performance.mp3
Mahlon