[Help needed for newbie trader] A question on Indicators

[J_128]

@ jackpinion thanks for great information about emas ;) is fantastic rep +++[/align]

[EuroTrader]

(04-19-2021 03:22 AM)v555 Wrote:  

After noticing that this Forex section is full of Courses each advising of various Indicators, I am yet to come across a single indicator that can help in the following situation.

The picture here shows 15-minute charts of 2 stocks separated by the pink line. Left side is of one stock going bullish after the first candle of the day. Right side is of another stock going bearish after the first candle of the day.

My question is, is there one or more indicator(s) which can help to predict the direction of the second candle of the day after the long first candles in each of the above?

That is, how can one avoid going Short on the left side stock? And how can one avoid going Long on the right side stock?

Indicator like RSI is useless here, since prices can stay oversold/overbought for long periods of time. And indicator like MACD is useless too since it is lagging.

Although the picture is specific to the first candle of the day, obviously it applies during any time throughout a trading day.

Experts' suggestions and opinions are welcome; your answer will help all BBHF mates looking for similar answers.

(This question is on behalf of a friend; I am not into d-a-y trading currently - of course it can help me too if I get into day trading in the future.)

Thanks in advance.

v555 asked me to comment for everyone and I'm happy to. However, I first admit I haven't fully read the other comments so if this has already been covered, that's why I would be re-posting.

From the charts, you're looking at two different kinds of gaps.

Markets move because new information is entering in the form of many, many participants making buy or sell decisions. Usually it enters slowly and in a somewhat orderly fashion. Sometimes, though, new information comes in before the Open -- while the markets are closed and the various brokers and back offices are settling the day's transactions. Often it happens over the weekend. When that occurs, there will be a sudden price movement away from the last close and the space in-between is called a gap (in price).

These are two slightly different kinds of gaps and I won't teach a lesson on how to identify which kind and how to trade it since there are plenty of free resources available for that.

I did see a couple of posts mentioning the use of heikin-ashi candles and moving averages. I've never used heikin-ashi candles since I want to know the exact high-low-close and those show different information. I've heard heiken-ashi are good for trends but I already know how to trail a trend so, anyway, I don't use them . . . and have no clue whether they help beginners trade a gap. With regard to moving averages, they are sometimes good and sometimes not. Sometimes really good and sometimes really not. In the case of these gaps, all your major moving averages could have been right above price, indicating you would be a seller there, or already been a seller there, and price would have gapped up and THROUGH those moving averages nonetheless.

There was a guy (he may be dead by now -- haven't heard about him in years) named TOBY CRABEL who taught in the early 1990s when I started. [Yeah, yeah, I'm an old fart! LOL!]. He was smart and good and produced a little-known work specifically on trading gaps. It's old-fashioned but the only things HFTs (which dominate current markets) really do is add speed to the transactions . . . so a lot of "old-fashioned" still works.

Anyway, I'd search out that work. I've looked for a couple of days but have so many things on so many external HDs I can't find it. If I come across my copy I'll post it.

All of the above is just one reason why I went (15-20 years ago) to taking indicators off my charts and trading price action. Now it's the flavor-of-the-month and everyone is selling a course on How To Trade Price Action . . . but they're mostly wrong about key aspects and don't know about others. Believe it or not, successful traders don't sell their success in a video course. We still use it every day in the markets. However, there are a few good resources (I've heard babypips.com is good for beginners) and all you really need is a single repeating pattern that gives you an edge and patiently wait for that to re-appear and wear it out! Then, while waiting for your repeating pattern, you'll begin to slowly see other patterns and you add them to your arsenal one at a time.

Absent the sudden introduction of significant new information -- which just happened yesterday (4/22) afternoon when the ridiculous new capital gains tax increases were published -- but absent sudden new information, all you need are the highs/lows/closes of the current candle and those nearby.

There's no need to rush. The markets will still be here next week, and next month, and next year. Rushing is usually greed talking. Successful trading is the same as operating a business (or it should be). It's not emotionally based (or shouldn't be). You will NOT get rich overnight, unless very lucky, and trading based on luck will quickly run out. Trade on superior business knowledge.

The markets are a huge puzzle. People who solve the puzzle (or problem) are highly compensated for their efforts. Where will price go next? If you correctly solve that you get paid very well. Price action (your repeating pattern) gives you the edge to solve that problem and also get paid very well too.

What I'm trying to say is that you don't need to know on every single candle what price will do next to be a highly successful and well-paid trader. That knowledge will eventually come. Find your pattern.

Don't rush.

There is no magical Holy Grail (except YOU and your superior knowledge).

Good Luck!
EuroTrader

[v555]

Thank You, EuroTrader, for chiming in and sharing your insights for all members, based on your decades of experience.

Though I am slightly disappointed that there is no direct answer to my question, probably I will have to be content with the thought that there is no holy grail in Trading outside of ourselves, as Van K. Tharp says.

As Robert Greene elegantly lays out in Mastery, there is no shortcut for any worthwhile achievement, including mastering Trading.

Your post will be appreciated by those who are capable of understanding it; thanks again.