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Strategies & Market Trends : NetCurrents NTCS -- Ignore unavailable to you. Want to Upgrade?

To: Bocor who wrote (414)	10/8/2000 11:33:27 AM
From: Teresa Lo	Read Replies (1) \| Respond to of 8925

"...when the market downdrafts severely and takes everything in it's path down, does that count as a break of support in the same way as if the price had dropped through support on a normal trading day?" I don't really understand the question, per se, since by definition, any downdraft will have happened during the normal trading day? Anyway, let's go on about indicators. I wrote a short piece on them a while ago: ispeculator.com I know I'm going to catch flack here, but most of the ones you see people use are the ones that are called oscillators, i.e., the ones that have lines that indicate overbought and oversold zones. They tend to work well when the market is in a trading range (going up and down between two fixed points), but when the market is trending (up OR down), it will be stuck in the over bought/oversold zones for a long time, typically leaving the trader guessing about when the trend will reverse. The problem there is that the market doesn't just go up and down, it also goes sideways. When there is an emerging trend, or when a trend ends in consolidation, oscillators are not that helpful, in my opinion. You can see how three classics, the MACD, stochastics and RSI worked on this latest downdraft. I was never happy with the way these indicators worked for me. The fact that they are called indicators in the first place tells me that they only "indicate" when it's "getting close", rather than exact spots of entry. Also, the indicators are based on the price itself anyway, making it "homomorphic" to the price. The only decent way to use the indicators, I think, is to look for the so-called divergences, but even then, they don't provide me with that much information. In this chart below, the yellow lines market out the divergences between the indicators and the price, where the indicator did not make a lower low vs. the price. This is a signal that most traders spend their time looking for. But in the end, while it did help locate a pause in the downtrend, it was not the end of the trend itself, for after the big consolidation period, it went lower still. ispeculator.com These are my thoughts, but I as am not the best user of indicators, perhaps someone will come and give us another perspective on them. For example, my mentor uses a modified Coppock curve in his trading, and he "counts the waves", i.e. the number of higher lows that the oscillator makes when the market is trending, and it works for him. ispeculator.com But then again, he's the pioneer in this field, and the 1997 MTA gold medal winner in this department. ispeculator.com And speaking of Notley, if anyone saw him speak this weekend at the IFTA 2000 Conference in Germany, please give us a quick update! vtad.net Best book on indictors, their uses and flaws, is from LeBeau and Lucas. Do not be fooled by the title: amazon.com Teresa