As a technical trader we use all sorts of things to find trade setups. We use many different chart patterns, moving averages, volume, countless mathematical calculations and formulas, oscillators, indicators, and many other things. Simply put, I believe that you should use whatever tool that you believe works and gives you an edge in the stock market. But finding the tool that performs best and sticking to it is the hard part.
Let’s take a look at how you can make this easier for yourself…
I have now taught and shown thousands of traders all over the world what I do to find successful trade setups consistently. Often by the end of the class or seminar the students always ask me why I did not show them how to use and read indicators and oscillators. I always tell them that I do not use indicators and oscillators because they are all lagging and do not represent real time. The only real time tools are price, pattern, time and volume. These real time factors are pretty much everything that you need to be successful. So often, I have watched a trader sell short a stock based on an indicator or oscillator and that stock keeps going higher. It has also happened the other way too, they buy a stock because the indicator is at the bottom and indicates that the stocks should rise but it stock keeps going lower. These tool have cause traders many headaches and troubles over the years so I do not use them regularly.
There are times when these indicators and oscillators can be useful but it is very rare. The only time I will look at these indicators / oscillators is when a stock is in a major overbought or oversold condition. Even then, I will need to make sure that there is a positive or negative divergence between the indicator / oscillator and the stock that I’m looking at. If there is a divergence then I look for some type of reversal pattern to form on the chart and then enter a position. Practice this and test it out for yourself and you will see why I do it this way.