I day trade, and am always eager and happy to talk about the indicators I use.
There are a total of eight, and I consider all of them indispensable tools for the serious day trader.
Let me briefly discuss each one now:
The foundation of my trading system is my scalper. It generates signals in realtime, and allows me to scalp trades with extreme precision.
It is not infallible however, and that’s what my other indicators are for: confirmation. In trading, the metric of volume is key, and is the reason I have an indicator devoted to analyzing the price/volume relationship. It lets me know if my security is undergoing accumulation, or if it’s experiencing distribution. Needless to say, I only buy when I have accumulation.
I also look at money flow. Now, I know that generic money flow indicators are out there, and I am aware of their limitations. But it is something that is possible to accurately gauge. I use it in conjunction with my volume analyzer to measure institutional participation. When you have “big money” coming into a security, and evidence of institutional accumulation, odds are that you have a winner. Institutional backing is paramount; identifying it is the basis of my trading system, and I don’t trade without it.
I next reference my detrended price oscillator. It’s similar to a “squeeze” study, but faster and less prone to false readings. It lets me know if I have momentum on my side, and it too must agree with the signal given by my scalper.
Having established trend, strength and momentum and institutional involvement, I next look at support and resistance levels. This is where my pivot study comes in. What’s especially neat about it is that it incorporates automation to keep my monitors clutter-free. The levels only show up as price approaches them! My pivots utilize the “classic” formula for pivots, and identify the same support and resistance levels that institutional investors use. They also display the prior day’s highs and lows, as they too can sometimes come into play.
Finally, I look to see what my random walk analyzer is saying. Though it can be used for trend acquisition, I primarily use it as a filter, relying on it to give final confirmation of my signal, or countermand it.
At this point, I have a very high probability trade, and pull the trigger.
Of course, trading without having proper money management discipline is a risky proposition. I daresay it has been the downfall of many a trader. It is at this point – after the trade has been initiated – that the good traders separate themselves from the bad. It is why I always use a stop. I might not always win, but when I lose, I keep my losses small, and live to trade another day.
These are the indicators I use. I understand them, the metrics they utilize, and what they do.
Understand your indicators like I do mine, and you’ll be sure to succeed at trading too.