|
PureBytes Links
Trading Reference Links
|
RT's
The use of indicators for any time compression be it intra-day or otherwise
is where Bill and I have disagreed before. Although I am not interested in
any further debate on the subject, I will restate that I believe that some
indicators are good for day trading for the benefit of the new among us.
In the past I demonstrated how a Displaced Moving Average (DMA) with a
length of 2 and displacement of about 5 can be used to generate signals as
the price crosses back and forth across the DMA.
Another indicator that can be used is the exotic Bollinger Bands (BB)
combined with a moving average (MA). I use a length of about 20 for each and
BB Standard Deviations of 2 and -2. It would take a good deal of text to
delve into all the ways BB's and MA's can be used but I will attach a 5 min.
chart of yesterdays bonds with some arrows on it for reference. If you're
very quick you can trade the Standard Deviation bounces that occur when the
BB's are moving very horizontally. You trade the pull back when the price
gets very near the opposite band. When the close stays outside a band it
usually means a trending move is underway. You can also add to your position
in a trending phase if the price moves across the line for a brief time.
I have also added a simple Close-Close[1] Oscillator to the BB chart. In the
first sub plot (labeled 1) you have the raw information showing all of the
"nosie". In the second plot (labeled 2) I smoothed (delayed) the C-C[1]
oscillator with a 3 length MA. A quick look at #2 on the 13th will tell you
that from early on the bonds were weakening. Could you use that kind of
info?
My point is that either extreme is questionable. Saying that indicators are
useless or that chart reading is not a good idea are both wrong. Use them
together with price as your ultimate guide for the best of both worlds.
FYI, I am not currently day trading anything, and for the neophytes, it's
very risky and difficult to do it successfully.
Prosper
> A little earlier today, I think, someone on the list wanted to have some
setting for the MACD indicator to be used for divergence. Well I am sure
that whatever settings you use, you are going to find that the indicator is
wonderful after the event, but probably not so good before it. If you
actually have to put your money on the line, looking for an entry...????
Probably the best divergence indicator is one that is based on the current
price action that you are looking at on your screen, happening as you are
looking at it - with your finger on the button, as it were. Today, we had
a wonderful example (and I am short as I write, watching it go further, I
hope, before having to pull out when Mr G starts to speak...!)
Anyway, look at the enclosed carefully, and you will see that for reasons
best known the Almighty, the Spoos started to climb as the Boos were in
congestion. Then the Spoo suddenly put in two big bars and the Bonds seemed
to be caught flat footed. Now that is what I call a Divergence Indicator
which can really produce the goodies.
You had at least five minutes to get your trade on. You made the intraday
break and the Inside Day trade and you should still be short with the best
part of 20 ticks in the bag and watch more, as the bonds tank and, just for
once (these days!) the Spoo turning round and following. We could get a
big point of this yet...
In haste..... O Yes...!! The Bonds is a great contract, and its worth
learning its little foibles...!!
Bill Eykyn
www.t-bondtrader.com
"Learn to read the tape"
Attachment Converted: "f:\eudora\attach\BB.gif"
|