Conventional Indicators

One thing some of you asked for was some tips on conventional indicators and while a lot of my posts will be on their failings or how you can improve on them, I also will post how some basic indicators and some custom ones can be used.

 This is a simple intraday reversal, to catch it quickly you have to use short intraday harts like the 1 min, although confirmation on multiple timeframes can lead to some good moves. In the top window is one of the most under used indicators out there-it's just not glamorous, but it gets the job done. ROC-Rate of Change applied to price. Almost any indicator you use, the most powerful signal will come from divergences with price, you can see ROC put in such a divergence. In the lower window in a MACD histogram, but I don't want to see what everyone else sees, so I use longer settings that reduce noise- (26, 52, 3) you can see it also made a positive divergence. I use RSI 14, you can use shorter timeframes, but longer ones don't give as good of a signal. RSI was also positively divergence at the lows. If you want to trade a different trend, use a different length chart.

 Here's a hold over from the day trading days, the 50 bar 5 min moving average, traders go long/short on crossovers of the average. Note the resistance it provided, this morning when the gap up crossed below, volume picked up. Here's  hint about volume-watch for subtle changes, not just the huge spikes. Around noon time we had a move above the average and a failure and re-test, note the volume increase on the failure of the retest, here it's acting as resistance, later when it broke through it did so on a powerful candlestick and jump in volume. You have to be careful with this though as Wall Street does manipulate it from time to time, confirming with other indicators is best.

 Here you can see part of yesterday's descending triangle, increases in volume often lead to reversals, especially with a reversal candlestick. The white trend line represents the confirm/fail area of the triangle, when prices moved below the white trendline, they did so with some momentum and volume. I don't have to say much about price patterns that are a century old, if you've been here for  few months you've seen how often they are manipulated. They provide great shakeout areas and we often see Crazy Ivan shakeouts around price patterns, they are too obvious and what technical traders will do is so reliable that it's profitable for Wall Street to manipulate them, so much so it makes Wall Street predictable.

 In the lower window is my version of a DeMark buy/sell indicator, it works pretty well and on multiple timeframes.

 Here's a longer timeframe with more important signals, but you will also miss important signals that are on short term charts and can often be too early or late to the party. Multiple timeframe confirmation is the best.

 The reason I use multiple Bollinger Bands is because they tend to bounce from one level to the opposite. You can see the drop to the yellow band, then a bounce to the yellow band, and then a drop to the blue band, the yellow had separated too much to be hit on the last move.

And the famous moving average crossover system which when backtested, including Golden Crosses and Death Crosses, do not perform nearly as well as people think, they just tend to find examples that worked and show those, I can show you from backtesting them, way more failed signals then reliable ones. One of the biggest problems with crossover systems is whipsaws or false cross-overs.  I found a way to deal with them by adding a custom indicator in the middle window and a blue moving average on it. I also use RSI  above or below 50 as a 3rd signal. All 3 have to be in alignment for a long/short signal.

Here you can only see 1 failed price moving average crossover failure, but on certain charts we see a lot, but 90% of the time, this combination gives solid signals as it did all 3 times here. Of course the timeframe you are looking at should math up with the trend you are following. Shorter timeframes n provide earlier entries, but often more signals and more bad signals, longer timeframes are more reliable, but can have you in a move late. Adding these two indicators to the MA crossover system greatly improved back tested results.