Technical Indicators

"Which are the best indicators that are very accurate?!" That was the first thought that i had in mind when I got my very first charting software from Optionsxpress. What most novices don't realize are that the oscillators and indicators are created by calculating the average historical information,thus formulating the probabilities of a direction. The common ideology amongst novices on oscillators are that they think they got a "crystal ball" that predicts the future.That's where they start to wrong themselves once they have this idea that oscillators,themselves and the experts can predict the future.One of the axioms that I hold strongly as a trader is that I never think I know about what is going to happen next.That is one of the reason why I dislike watching CNBC,after getting the reports and listening to them,subconsciously I start to think I know without realizing that my mind has been messed up.Going back to the Indicators,so should we use them? Of course! Without it, it's like driving a car with one hand,possible,but not easy.Use indicators with the thinking of probabilities,not assumptions. So which are the commonly(or the best) use Oscillators?

MACD:This oscillators helps prevent you from getting whipsawed.I rely this more than any other oscillators.My settings are 7,13,7.I usually enter a trade when both MACD line cross.

Volume: It is one of the best ways to "see the future".Not exactly see the future,but you can sense what is goin to happen to the price.The price is being bullish,but if you start to see a decline in volume,the price is going to stall or it is going to change direction

Bollinger Band:You have to use this! Before I knew of this oscillator,I would always be entering at a overbought position,but now with this,I know my trades are high probabilities success trades!and most of the time if the price passes the middle band,it will usually go all the way through.For a call position,I would only buy,if the price is hovering around the bottom band and if prices reach to a point where they are touching the top band,I would sell it. Everything I say is base on probabilities.It doesn't neccesarily mean if the price is below the band,it has to go up and vice versa.The lines are historical statistics,formulated out to give you the standard deviation average.

Stochastic: The cousin of MACD,reliable but certain times they set up for a false entries and then you get whip sawed.

RSI Stochastic:The cousin of MACD,I would use this if I was a Day trader,but I'm not. This is one of the oscillators that I don't heed.They react to the slightest price movement and if you were to follow this oscillator blindly,there would a good possibility that your account could go bust.From my opinion,this oscillator gets you whipsawed most of the time.

ATR:Stands for average true range.Go to the current line and get the figure.Multiply it by 1.5. Take the answer and add or subtract the current opening price.If the underlying price were to past the calculated answer,it usually means that it will continue the direction that it pass.

The other popular oscillators that I don't use:
Open Interest: I don't use it because I don't have this in my online software. I would definately use this indicator if I have it in my software. Similar to Volume,If Open Interest increase/decrease,be sure to watch out for price movement.

Force Index: Shows how strong the sentiment of the underlying price movement is.

RSI: This just tells you whether it is overbought or oversold. And when the line passes the 50 mark,it is usually a sign that the direction will continue.

Cheers
Hyzel

"A good trader has to have three things: a chronic inability to accept things at face value,to feel continuously unsettled, and to have humility."

Michael Steinhardt