Indicators: useful for day trading? How can I use indicators for day trading?

Indicators, indicators, indicators. If you are just starting, some trading gurus might show you a few indicators and say they can make you a PRO in a blink of an eye! Wrong!

Back in the real world, where trading is difficult, there is an indicator of anything and everything you can imagine in the market. Just like there’s an app for that, there’s also an indicator for whatever you’re looking to find. You can find a ton of different trading indicators on any platform.

Don’t think I’m saying that I think all indicators are useless. Some are very helpful, but you have to be careful. Day trading is not as easy as trading a few simple “indicator structures.”

How do indicators work?

Nine out of ten indicators are based on primitive mathematical equations. The ATR indicator is a great example. This indicator calculates the average true range (or the average price movement within a certain period). More complex indicators work with candle bodies and operate under elaborate equations; however, they are still based on the “math of past price movements.”

There isn't a single trading indicator that can predict future price moves with consistent accuracy, or everyone would be rich.

Indicators are purely mathematical tools and are not capable of producing good trading results consistently. They are useful from time to time if you use them as the tools they are.

Best indicators for day trading

There are tons of different indicators out there. Most are free, but some you only have access to if you pay for them. Prices usually range from $50 to even $900 or more. You should be careful with these. Those fancy indicators are always displaying flawless backtests, but backtests can be faked very easily. It’s like tap water in a fancy bottle: looks great until you open it. It is still just regular old tap-water on the inside.

There are tons of currency pairs, indices, stocks, futures, metals, etc. All it takes to make the indicator is to find one with the right price movement to fit the “algorithm” of that particular trading indicator. Using a “preloaded” chart is how the indicator creators will always have good looking and perfect trading statistics to display on their sales pages.

I have tried many indicators, and I can say that they are all equally flawed. I say this with caution because you might run with it. I have found that a combination of MACD and stochastic does the trick for me in a few very specific trading situations.

How to use the RSI indicator for day trading

I did try the RSI indicator for a while as well. I could write a whole post on how to use the RSI indicator for day trading, and it’s not possible to describe it just in a few sentences. I have seen a lot of indicators based at least partially on the RSI (Relative Strength Index) indicator. It might look very profitable and accurate, spitting out only correct trading signals, but things quickly change once you start trading live.

Flaws of day trading indicators

Another flaw of trading indicators is that they work only in certain market conditions. Let's take MACD as an example. There are a few relatively complex MACD structures that can produce outsized profits; however, only in a trendy market. The same structures will produce huge losses in a slow market. The market changes every day, and that is why you need a lot more than a few simple trading indicator structures. Otherwise, you will be shooting blindly and hoping for the best.

Indicators are not enough

You need all the tools in your toolbox to build a house and to trade successfully as well. That's the reason why I teach different approaches to different market conditions, so you could approach the market with the most suitable strategy to minimize the risks and maximize profit potential. You wouldn’t try to drive with just one wheel, would you? The same is true in trading. You must be able to analyze, understand, explain, and trade any market on any given day. Indicators are not enough.

If you ever choose to trade with one of these simple indicator systems, be sure to do your due diligence, and investigate them thoroughly, although I highly suggest looking into more complex trading strategies that have a better chance of producing consistent profits.

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