Indicators: What Purpose Do They Serve?
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Many traders confuse indicator generation and technical analysis software with trading. This is not the case. I doubt you can find a truly competent trader in the world who is interested in endlessly experimenting with indicators. Of course, they don’t spend hours going through new scripts that have been added to a program like TradingView.
Indicators are part of the system; they are not the system. If you spend all your time playing with indicators, you are not traders but amateurs. Emphasis is laid on the fact that there is no magic system, no Holy Grail; what matters is discipline and common sense. I have a number of core beliefs about indicators, including the following:
More complicated indicators are less likely they are to work. For instance, let’s assume you just paid $15,000 for the super secret magic indicator course; then one must admit that you got your money’s worth. Simple systems and simple ideas work best. Markets can do one of three things: up, down, or do nothing.
Also, 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 stack software and indicators, chances are you won’t spend much time working on the core elements of trading.
There is nothing original about indicators, everyone sees either trend followers or oscillators. Also, there is nothing original on the market.
Further, there is a school of thought that if I only have one metric, 25 must be 25 times better. This is a false assumption because it is based on the principle 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 just for what it is.
Indicators are placebos. They give you the confidence to pull the trigger, and then the hard work begins.
Also, to gain confidence, observe the behavior of the market and observe its flows. If you have trouble adjusting to the ebb and flow of the market, it is better that traders who struggle to find a rhythm go to the beach and stand in thigh-deep water, close their eyes, and feel the water washed over them. When you are in tune with the water, you will be able to anticipate the rhythm of the ocean.
Don’t worry about the indicators that anyone else uses. Everything they do is more like intelligent assumptions.
Lastly, if everyone is obsessed with indicators and losing, then what do you think the logical trajectory of your development should be?
