frmen - I can concur with SS re indicators. I tend to rely on them less now. I do find macd and stochastics can be useful for SCREENING for say uptrending stocks - but then I would look at them with VSA glasses - I would not judge there technical quality at the live edge of the chart based on indicators. The problem with indicators is that they are all derived from price - obviously, which means the indicator is generated by price or price movement + volume etc - the indicator in itself is not actually making a prediction - So if price moves up - you will get a positive signal. If price goes down you will get negative signals - if price whipsaws you get conflicting signals. Now you can tweak indicators to ignore a lot of whipsawing,but this is done by introducing "lag." The more responsive to price an indicator is - the more it will whipsaw with the price. So when some one say (as I have done in the past) "look what happened when we had a bullish cross over here - price went up." Wrong - the sentence should go. "Look what happenned here when price went up - it created a bullish cross."
Have a look at SS's silver chart he just posted. Look at the top when silver was $50. Now the stochastics actually started behaving negatively at the top suggesting you should sell - Brilliant hey! (stochastics are derived from where price is tending to close on a bar - so if I had a favourite that would be the one) The problem is it generated the exact same signal when the price was below $38 before that - so what do you do when everyone is telling you to buy silver and the stochastics are generating the same negative signal as at a time previously when you should have been buying? If you were using VSA however - you would at the top be getting the perfect short setup - ultra high volume up - upthrust - no demand - get out of town NOW! And at $38 bucks previously you get high slam dunk down followed by price going up then retesting on no supply - GET IN TO TOWN NOW.
Anyway - point is unless I am screening - if I'm just looking at a chart I don't need a macd to tell me its in an uptrend. I don't need stochastics to tell me price is tending to close on its lows or highs - I can visually see if its making higher lows and highs and I can already see if price is closing on the lows etc. So I won't poo hoo them because there are people who use them in a system very profitably but I personally have had very mixed results. How many times have you bought a MACD signal generated by a spike up move on ultrahigh volume? If you are lucky its absorbtion volume - but most the time its not - so unless I'm screening I don't use them anymore because I find VSA a better and more logical methodology of what is happening RIGHT NOW. The other thing to keep in mind is that Smart money are aware of indicators and moving averages - Why do you think Rob from Trade the trade uses the 41 EMA? Its because nobody else is using it - so its unlikely it will be specifically stop hunted. And if the pros have eliminated supply in a market and gained control of price then they can pretty much generate any indicator signal they want to make you jump whichever way they want - because indicators are generated by price and if you have gained control of price you can control the signals. Anyway - thats just me - I suck at making money from indicators - but there are people who do so profitably. And there is nothing to say you cant combine VSA and indicators - but why complicate something unnecessarily? Anyway VSA uses volume and the spread of the bar and trendlines/support resistance etc - so I find pitchforks to work well as an add on to VSA. Now I've confused everybody.
