Many traders confuse the generation of indicators and playing with technical analysis software with trading. It is not. I doubt you could find a truly proficient trader anywhere in the world who was interested in endlessly experimenting with indicators. They certainly don’t spend hours trolling through the new scripts that have been added to a program such as TradingView. Indicators are part of the system they are not the system.
If you spend all your time playing with indicators you are not a trader but a hobbyist. I need to reiterate there is no magic system there is no Holy Grail what there is is discipline and common sense.
I have a series of core beliefs about indicators, including the following.
1. The more complicated they are the less likely they are to work. If you have just paid $15,000 for the magic super secret know all indicator course then sadly I think you have done your dough. Simple systems and simple ideas work best. Markets can do one of three things, go up, go down, go nowhere.
2. The more you know about your software, the less you know about trading and the less you do. This is a direct inverse correlation if you collect software and indicators chances are you don’t spend much time working on the essentials of trading.
3. There is nothing original in indicators, they all seem to be either trend-following or oscillators. Likewise, there is nothing original in markets.
4. There is a school of thought that if I have one indicator then 25 should be 25 times better. This is a false assumption since it is based on the premise that it is the indicators that make the trader in the real world it is the trader that makes the indicator. A good trader can make any trend following system work purely because of the person they are.
5. Indicators are placebos. They give you the confidence to pull the trigger, and then the hard work starts.
6. To gain confidence look at the way the market behaves watch it see how it ebbs and flows. If you are struggling to be in tune with the ebbs and flows of the market. I suggest that what traders who are struggling to find a rhythm should do is go down to the beach and stand in the water up to their thighs, shut their eyes and feel the water lap over them. When you are in tune with the water you will be able to anticipate the tempo of the ocean.
7. Don’t worry about the indicators that I or anyone else, uses what I do is irrelevant to you. It is rather like the assumption I made when I learned to play tennis in the 1970’s I imagined that if I used exactly the same tennis racquet as Bjorn Borg then I would have to be unbeatable. Guess again.
8. If everyone else is obsessed with indicators and is losing then what do you think the logical trajectory of your development should be?
Great article