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Strategies & Market Trends : Ask Vendit Off-Topic Questions

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To: rich evans who wrote (8605)	5/11/2005 6:16:45 PM
From: Vendit™	Read Replies (1) of 8752

Rich, Below is my reply to your question about the indicators as promised. Feel free to ask questions and I will answer them. As always I welcome open and broad discussions on this thread regarding all technical indicators and even an occasional very confusing to me comment about fundamentals. <g> My first introduction to technical trading was by use of a very crude method, although successful. I simply used the 10 DMA and 50 DMA crossovers to find entry and exit points in small biotech companies. Note the crossovers vs. price action. It works well with biotech for some reason. 139.142.147.218 As I became more interested in a more sophisticated form of moving averages I discovered John Bollinger and began an effort to locate more precise top and bottoms for entry and exits. This additional tool did enhance my position trading abilities but still left a lot of judgment calls and gray areas. 139.142.147.218 I began reading about ROC and RSI and also incorporated these into my mix as well. Still not satisfied because of the lack of precision I continued to learn about each indicator. I also studied candles until I had a very good understanding of them as well. 139.142.147.218 Looking at the above chart most people see confusion! My next step was to find the most precise but at the same time reliable and easy to read indicators so as to carve out all of the other indicators which may cast some doubt. The same chart with just 90 days showing. I’m sure you can see conflicting indicators. 139.142.147.218 OBV and Williams are telling you the same information so they are redundant when used together on the same chart. I like Williams precision just a little better so I did away with OBV. RSI and Williams are also very close information wise so still liking Williams best I did away with RSI too. 139.142.147.218 Next in line is something that I get spanked by others for doing but I also eliminated volume! The reason I did this is because as a general rule I don’t trade stocks with a daily trade volume less than 1mm shares anyway so why do I need to see the volume? I think it is a given and only serves to further confuse one in the decision making process. (The stock I’m using obviously doesn’t meet my volume requirement so I would not trade it) 139.142.147.218 Two additional indicators that are redundant, Stochastic and ROC. I find ROC less effective in forecasting entry and exit although it does identify the trend. I much prefer stochastic because it’s scale is absolute, 0 - 100 . No need for ROC IMO. 139.142.147.218 Lastly RSI are Money Flow are redundant to Williams however Williams reacts sooner and is more efficient than is the other two indicators, so I like Williams best. Now you see my 4 favored lower indicators. -Stochastic to identify entry and exit. -MACD to measure trend and momentum. -Williams and Money flow are used to see trend reversals a day or so in advance of the other indicators. Williams always turns first followed by money flow by as much as ½ to a full day. I use Money Flow as a confirming indicator to Williams. -Candles are as important as the other indicators in helping to locate tops and bottoms. Bollinger bands confirm MAC momentum indications. Williams and Money flow are used to see trend reversals a day or so in advance of the other indicators. I find candles especially useful in locating area of support and resistance as well as levels to place stop orders, buy orders and exit orders. The bottom line is that I use all 4 indicators when looking for entry. Once entry is made then I just need Stochastic and MACD as well as watching the daily candle. Once Stochastic shows a slight loss of momentum I then add back Williams and Money flow to give me a hint that a top is near and I key on intraday indicators and intraday support resistance levels for exit. I hope that this is helpful and not confusing. Reid

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