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Trend & Momentum - Indicators of Choice

Which Momentum Oscillator Should I use for My Traderslaboratory Trading System  

40 members have voted

  1. 1. Which Momentum Oscillator Should I use for My Traderslaboratory Trading System

    • CCI
      5
    • Momentum
      4
    • Rate of Change
      0
    • RSI
      14
    • Stochastics
      8
    • Williams %R
      3
    • Other
      6


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Lately, I see many posts/threads here at Traderslaboratory about traders who are struggling, wondering if they should give up and quit, wondering why they can't "get it."

 

I would like to try to help.

 

I am going to put together an indicator trading system and trading plan in real time here at Traderslaboratory.com

 

I want input from fellow posters/lurkers as to which indicators I should use.

 

I need one indicator to major trend, and one indicator to determine minor trend, which I consider most visible using a momentum oscillator.

 

I am going to try to post a poll. Please vote for your preferred indicator. In this poll, we will determine which momentum oscillator I will use to build the system. If you vote "other," please post in the thread which "other" you are suggesting.

 

As for the major trend indicator, that will be another poll. But if anyone would wish to make a suggestion for an indicator to include in that poll, please post your suggestions here.

 

Thank you for your participation.

 

-OT

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... If you vote "other," please post in the thread which "other" you are suggesting...

 

I see we have one vote for RSI, and one vote for "Other." If you choose to participate in the poll by voting "Other," take one extra moment and post the name of the indicator you'd suggest.

 

Thank You,

 

-OT

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other - its not an oscilator, more an alert - the classic Donchian channel.

Personally I favour a weekly mid point Donchain channel applied on a daily chart to help determine the trend - above indicates trend is likely to be up, below trend down - more than anything a cross over indicates alert to watch for other entries

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other - its not an oscilator, more an alert - the classic Donchian channel. Personally I favour a weekly mid point Donchain channel applied on a daily chart to help determine the trend - above indicates trend is likely to be up, below trend down - more than anything a cross over indicates alert to watch for other entries

 

Thank you, SIUYA. My intention is to use the oscillator which we are currently in the process of selecting as an overbought/oversold indicator that will be the alert we will use to watch price for an entry. I would consider the Donchian channel, and I assume you would agree, to be an indicator useful in determining overall trend. From your post, I feel that you too hold that view. The next poll will choose the particular indicator we will use to determine the overall trend, and I will include the Donchian Channel amongst the choices. Thank you for your very good suggestion.

 

Thank You,

 

-OT

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My preferred "indicator" is my skill at reading momentum (reading the tape) I use the NYSE Tick, and the Time& Sales Strip primarily. The Tick is a very powerful tool when used correctly, as is T&S...each one shows a different aspect of momentum. The TICK displays the broad market's strength or weakness, and the T&S displays all kinds of information about the speed at which transactions are being executed (helpful when you want to indentify programmed execution). The "roll" of the tape (the speed and quality of the movement can be interpreted to provide information about the way that price movements are either accepted or rejected by the broad market. For traders interested in learning to use these tools, the challenges are A.) finding someone who knows HOW to interpret the tick/T&S strip combination and B.) learning to understand the language used to describe the action in a useful way......I have seen several books on the subject, none of which provide anything even remotely useful....from my point of view this is probably going to be a lost art at some point in the near future as few are interested in taking the time to learn ( it might take from several months to several years to really master the technique) and I have only seen one person in the last 10 years who really knew how to read it well (and could describe it in a way that was understandable). As a final note, reading the tape is just part of the process...once a trader learns the basic skills, then the process of putting the action in context starts..(there are seasonal contexts, as well as short term contexts down to the hour of day that matter in terms of interpreting the action). The upside for the trader who is successful at learning to "read the tape" is that you then have a very high probability way of entering a position.

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I would say bollinger bands help a lot with a major tend, if the lower or upper bands are repeatedly being touched, you're in a strong up/down trend. However, I like RSI to show short trends, as I don't think they're as accurate on long trends.

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... I like RSI to show short trends, as I don't think they're as accurate on long trends.

 

 

For long term trends, when using the RSI, as with any oscillator, I would suggest that you must use a greater number of periods.

 

A 9 period RSI on a daily will tell you very little about the long-term trend of a security. A 50 period RSI on a daily chart, however, can tell you quite a bit about the longer term trend of a security.

 

The manner in which you apply the RSI would likely differ in each case. On the 9RSI, for example, perhaps you would tend to use it as an overbought/oversold indicator, where RSI>80 is overbought, and RSI<20 is oversold.

 

On the 50RSI, perhaps you would look for RSI>50 to define longer term trend as up and RSI<50 to indicate longer term trend is down.

 

As with any indicator, or with price action itself, "accuracy" is in the "eye of the beholder." Too often we, as "beholders," have no idea what it is we're looking at, and that is where I think my little exercise here at Traderslaboratory.com might help one or some of those struggling to make heads and tails of what it is they are "beholding."

 

Thank you for sharing your observation concerning RSI vs short-term vs long-term. Play with the number of periods on any of your favorite oscillators.

 

See what happens when you select a period far shorter than you would normally select.

 

Then see what happens when you select a period far longer than you would normally select.

 

Think outside the "indicator box" that most canned charting software software includes as "default" settings.

 

Too often, that "box" becomes a prison cell for the trader's mind. Tonight, we're going to have a jailbreak ...

 

 

Thank you,

 

-OT

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If I were to use an indicator I would use the Commodity Channel Index, CCI. General rules: Don't take the over-bought signal in an uptrend. Don't take the over-sold in a downtrend. In other words, trade with the trend. Wait until price crosses the 100 line toward the center zone as a method to confirm the entry.

 

Personally I use a few moving averages to help frame price action and support resistance.

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This poll has closed. The indicator chosen by the Traderslaboratory community is RSI. I will use this indicator as the short-term indicator for the system I will compose and trade in real time here at Traderslaboratory.

 

The community has selected the indicator. However, I will select the period we will use. It will be short - between a 3RSI and a 9RSI most likely.

 

I cannot add a new poll to this thread, so I will have to start a new thread with the pole which we will use to select the indicator which will be used to determine the long term trend of our trading system.

 

I think it best that the moderators close this thread at this time, and this is a developing project, and this thread has served its purpose. Further discussion and comments may be posted to the thread which will accompany the next poll - which should be posted soon.

 

Thank you to those who participated in this poll, and to those who offered comments and insight as well.

 

Thank You,

 

-OT

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