The following are just my opinions based on my trading style and my experience using them, giving each one a rating of 1-10 for usefulness. 10 being the most useful and 0 being almost worthless. Please don’t get offended If you have different reasons or ways of using them successfully that I have’nt mentioned. I encourage you to share. Maybe I’ll learn something new also. I may be ahead of a lot of traders, it doesn’t mean I can’t learn something useful.
MACD- Very popular indicator and great for divergence trades. Some people use it to go long or short based on the MA crossover. You can make money like this but it will take extreme discipline and money management to be successful because the MACD can change direction frequently, If the MACD is already below the zero line and it crosses up and below it again(extreme price weakness). This a powerful sell indication that wil most likely lead to a nice slide. Odds are a little better using some sort of momentumm indicator with it. It seems best used with time periods of an 1hr. or more. I use it for purposes of spotting divergence. I rate the MACD a (7) for overall usefulness.
RSI- used in conjunction with the MACD can improve your biased marginally. Above zero is strength and below zero is weakness. Best used on timeframes of 1hr or more to show true market strength. This indicator can help improve your biased marginally. I personally don’t use it. I’ve tried but It just doesn’t seem to make much difference in my decision making. I rate the RSI a (4) for overall usefulness.
ADX- Powerful trend indicator. I find that by the time the ADX is showing strength, the move is already well on their way. It doesn’t mean the trend is going to end soon, but you have missed a large portion. You can’t really use it to enter or exit but if you use a price action technique to enter the trend, you can feel good about your chances it will continue long enough to make a few bucks. This is also best used on timeframes of 1hr. or more. I never use the ADX because my skill level has moved past it. It did help me in the early stages though. I don’t think it’s bad, just not ideal. I rate the ADX a (6) for overall usefullness
Stochastics- I haven’t really found a good use for this indicator. I can normally see every move it makes before it makes it. I know about the “rising above the -20 technique” or “selling when both lines cross below 80” to find the market turn but I can usually see this plain as day with price action action. JMO. I give the Stochastocs a (0) for overall usefullness.
Pivot Points- These Hidden support and resistance lines work very well(although everyone knows about them).This isn’t really an indicator but more of a guide. They typicaly catch the more seasoned, price action, support and resistance guys off guard because they don’t believe in them.(The market makers know this) These are the first price points they attempt to push prices to when the market isn’t driving itself or there isn’t a strong S/R line in between. These are typical reversal lines. Be warned, market makers will purposely drive markets through these lines to catch stops because they know they are there. If you can catch a reversal after the stop run. The chances are high of a profitable trade. The best time to trade these levels is the first test of the day. These levels are credible. Just check your charts. Use daily and weekly pivot time frames. Know reason to get fancy with the pivot point moving average and all that stuff. just use them with the normal parameters and fade the first move. This is profitable. I give pivot points a (9) for overall usefulness
Fib lines- These lines work on larger time frames and can sometimes work on smaller time frames. The reason fib lines
work is because they have a large following, kind of a self for filling profacy. Also, some professionals when they are looking to buy or sell will use these lines as a guide. That is really all Fib lines are. A guide traders and pros alike use to find buy and sell points. Pivots points are still more powerful because they are used by a lot of market makers. The effectiveness of fib lines really just depends on who is participating in the moves. Sometimes the following is big because of professional money, and sometimes it’s not. I give Fib lines a (6) for overall usefullness.
Bolling Bands- These bands are used mainly to identify overbought oversold conditions. These bands are really just a crutch and and their effectiveness varies. I’ve seen people put 4 or 5 sets of bands up looking for reversals and other things. If these same people look to the left of their charts, they will see the areas the market is overbought or oversold very clearly. Also, I don’t really believe in the whole concept of overbought or oversold. A market could be overbought/ oversold for months!! The key to finding a reversal is being able to recognize a shift in supply and demand. Chart reading is the key. That being said, when used in conjunction with the Keltner Channals. They can expose an incredibley powerful breakout play used by many top traders known as “The Sqeeze Play”. The downside is, it’s hard to sit and wait for this play to setup because it doesn’t happen that often. But if you happen to run across it. It’ll be worth the wait. I give BB’s a (5) for overall usefuness.
Keltner Channals- Buy themselves I find them useless. You will be better of just guessing. Used in conjunction with the Bollinger Bands. It could lead to powerfu breakout play as mentioned above. I give Keltner Channes a (2) for overall usefullness.
ATR- good tool for trying to figure out a profit target for a trade. I personaly find that it’s easier to wait for an exit signal by watching the price momentum slowdown or begin to change. The price range changes frequently with daytrading but it might be useful as a swing trading tool or for trading timeframes of 4 hrs or more. I give the ATR a (4) for overal usefulness.
Moving Averages’s- MA’s are the most popular form of future price indication. They are really best used as a guide, but if you follow a market closely enough, you can find a good set of parameters to help you anticipate good reversal areas. A lot of people use the MA cross over technique and it is still a good, easy, trading technique. To be successful trading crossovers, it will take a great amount of discipline and money management but if used in conjuction with a solid understanding of S/R. You could be successful. I give moving averages a (8) for overall usefulness.
Volume- Yes, volume is an indicator and volume is also lagging. Why you ask? Because to properly anaylize volume, sometimes you have to look at 2 to 3 (or more) volume bars in the past to get an accurate depiction on what the present volume bar means. Also, sometimes you have to wait for another 1 to 2 bars to get the most accutate picture. With that being said, if anaylized properly and you don’t jump the gun too early, your trades won’t fail. Volume doesn’t lie. FOREX trades have know idea how much of a disadvantage they have by not having volume, and this is another main reason they use indicators. To try to figure out how much strength is in a move. My man, AceFX who runs an ongoing forex journal on this site, has accepted and embraced the fact that his trades have a 50% chance of winning or losing so he chooses his mastery of money management as his ace in the hole(This my friend is brilliant.) Volume(not always equity volume) is by far the best indication of price direction but it takes an understanding of market mechanics, support & resistance, and practice to use it properly. Mastering volume will greatly improve your probability of a successful trade in the equities markets. The truth is, it will take a lot of work and practice. I give volume a (10) for overall usefullness.
Waves- I almost feel bad for people that study waves. Unfortunately these folks are moving in reverse. These are people that have completely forgotten that markets are controlled by people and that most if not all professional money are moving in and out of the markets having know idea or caring what any wave is doing. A lot of professional traders trade at specific times and price levels and this is what causes the waves. If you learn how to read charts properly, you will see that this is just a bunch of hocus pocus and that you are watching a whole bunch of nothing. If you are a fan of any type of wave analysis, I refuse to debate you. I just hope you wake up sooner than later for your own benefit. I give wave analysis a(1) for overall usefullness.
Chart Patterns- chart pattern analysis is powerful if you understand what is going on in the move to create the pattern in the first place. This is why understanding supply and demand is very important. These imbalances is what creates the candle patterns. When you know the market mechanics (story) behind the patterns. It will help you determine if the pattern is real and worth taking a trade. This will come with a considerable amount of practice and study. Also, volume levels are useful here too. I give chart patterns a (8) for overall usefulness.