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John, Dan and others searching for indicators
I have been a member of this list for a little while, but this is my first
contribution. Couldn't resist it, following some posts which I have been
involved with on another list, concerning my views on indicators - or rather
my views on the fact that I do not trade with them, because....
I re-print a post below which may be of some interest. First of all, let
me say
that for the last few years I have only traded the T-Bonds and I do, indeed,
only day trade them. Secondly, for those on this list, who may well be on
the other list, please just press the 'delete' key and accept my apologies
for this duplication:
This is the post I responded to:
>I have been reading, and observing the Posts made by Real Traders for about
>5 months now, along with the Market predictions, different formulas, i.e.
>charts, lines, forks etc., and not only do I find allot of conflicting
>ideas, I truly do not see any consistency in any of these ideas!
>
I get in and out, go to bed, wake up the next morning and do it
>again. I just do not understand, how anyone, even with charts and
>indicators, can predict the future of any market?
This was my response, which I hope may be of some help for some people:
I would like to say just how much I agree with the sentiments expressed.
Day trading the T-Bonds is a way of making a living.
Once you have learnt the ropes and understand what it is
all about, it is very feasible to do it day after day after day after day.
But to position trade it, is as impossible as any other market. How the
heck any private individual can make a living out of that, I do not know.
I can understand how you can speculate. No problem. With large amounts of
capital, the ability to withstand drawdowns and using a blend of
fundamentals (COT, Open Interest, Volume, etc) and technical analysis, I can
see how one could make sizeable chunks of loot position trading. But making
a private living out of it......
Every day, I do what I do do and my brand of TA in a truly liquid, near
slippage free market allows me to make a living. Over night, I sleep - but
I do need to know what the Globex High and Low are the next day - but that
is my sole interest in what happens when the day has ended. The next day,
I do what I do do, again. It is not a stressful way of putting bread on the
table. Believe me!
But guess what? The only indicator you need is called PRICE ACTION. The
only indicator that works consistently is called PRICE ACTION. The only
indicator that doesn't lag is called PRICE ACTION. And where does the PRICE
ACTION count most? At major support and resistance levels. And where do
you find those? Where the PRICE ACTION has shown you where the PRICE ACTION
has been.
Trading is not complicated, but by Fibonacci, traders try and make it so...
Bill Eykyn
As you might expect, there was at least one person on the list who thought
my views on
indicators were far too strong....
I replied as follows (edited):
Over time, I have become very dogmatic over price action being preferred to
conventional indicators. But, I say this in the context of day trading the
T-Bonds. For clarity, let me say it again, DAY TRADING THE T-BONDS. For
me, when you are talking about a market which regularly trades half a
million contracts a day, some times much more, and on occasions over a
million, there are going to be unique factors. Notwithstanding this
fantastic liquidity (one tick spread, hardly ever any slippage) the daily
range is pretty small compared to, say, the S&P where indicators will react
very differently, no doubt. There is a wonderful, controlled (by
comparison
to most!) movement in the T-Bonds. Ultra- boring for some people. But up
and down the chart once or twice in a day for $500-$1,000 per contract is
good news for some people. The point is, the set ups and the price action
tell you what the T-Bonds are likely to do next.
Conventional indicators, as I have said many times, may and probably do work
very well for position players. They may work day trading some other
instrument - I haven't a clue. Now, some newbie traders will be starting
out position trading and may find an indicator or three just the job. Other
newbies, with less capital and looking to earn a living on a daily basis,
will, so far as I can advise, based on my experience (does that qualify it
enough?) be better off learning to trade, through reading the tape - which
is what price action is all about. They will be learning in a market which
is receptive to the beginner, for a mass of reasons, too numerous to go into
here.
I have survived long enough to know that it would have been very nice to
have been able to come to my conclusions, now, right at the beginning -
rather than learning from very hard knocks. The newbie still has to learn
and we all know there ain't no Holy Grail, but wouldn't it be nice to learn
to
read the tape, rather than be conned by all the system vendors, gismo
marvels and wondrous indicators - all of which, as far as I can see, lag
the market.
All I am suggesting is that you can learn to read the tape (I am talking
Bonds here) and do not need conventional indicators by the ton to do it.
The fact I don't recommend any, is only because I have not found a need for
them. Dear O dear, if I thought an RSI or triple crossover MA would do the
trick, I'd be the first to say so.
Why not? If someone has an indicator that works, use it. All I am
suggesting is don't waste a mass of time, energy and maybe money looking for
some wonderful indicator to tell you what to do. Most newbie's search for
them and systems to be able to trade with buy and sell signals. I've been
there, done that and didn't bother with the T-shirt. Now I'm on the
T-Bonds and you don't need an indicator.
I'll say no more because I am not trying to convince anyone to do anything.
I don't have to - I am not selling indicators!! But for some people I
might, through my manual, just save them a lot of heartache or banging
their heads on a brick wall trying to find a leading indicator that will
give them their fortune...
A lengthy first contribution (but hopefully useful reading for over the
week-end), but I really did feel sorry for those two people who went out and
spent money on indicators - as if Omega don't have enough on TS and SC as it
is!
Finally, I attach a .gif of a page taken from my manual on trading the
T-Bonds, which as all will see does not have an indicator in sight, but
gives every indication of what the market might do - through reading the
tape!
Happy Trading
Bill Eykyn
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