1. “Hi Ray, I want to ask you about the proliferation of indicators that are given with virtually every charting service. I keep seeing comments like “only 5% of traders ever make any money”
   Now I’m assuming that this ratio of winning traders has been roughly the same since the year dot, even long before computers were around. If that is true, then why are all these indicators not producing more winning traders?. I vaguely suspect that the pro’s are using them like a smokescreen so that the “sheep” get slaughtered on a consistant basis!!.
   Could you please give your view on it, thanks.”

I think an indicator is like a golf club… every year millions of dollars are spent on new clubs with the hope that “this” new club will take my game to the next level.

That being said, will the new club make a difference?

Yes and no.

It may make a huge difference to someone who has the skill to wield the club, but it will probably make almost no difference to someone who doesn’t.

It’s the same with indicators… if you have a great indicator, but couple that indicator with poor trading decisions and flawed logic, then you’ll really see no difference in the end. The club is only part of the whole equation.

I don’t believe there is a consipiracy by pros to use indicators as a smokescreen… I actually think non-pros go out looking for magical indicators thinking that this is what the pro’s are using… inadvertently causing themselves to focus on the wrong things.

2. While trend trading, I like to get in a trade after it has been consolidating. Is there a way to tell a true breakout from a false one?

   Three things to consider are:

   1. If the breakout is strong… in other words, does it extend well over the consolidation range vs just barely inching over.

   2. Is the breakout news driven or price driven… in other words, did news make it move or is it unknown as to why. News breaks tend to be more false.

   3. There’s no REAL way of knowing for sure if a breakout will be true until after its done… all you can do is add filters to attempt to reduce the odds, but that may simulataneously cause you to miss a good breakout… that is the nature of the beast.

3. If you could only choose one trading method for swing trading stocks and/or ETFs, what would it be and what are your rules for trading it?

   Interestingly enough, this is the one combination I haven’t really done… I’ve day traded stocks and ETFs, but not swing traded them. And since my day trading strategy does not really suit swing trading, I actually don’t have a specific trading method to recommend for this off hand.

4. If you had to pick the top 3 things to utilize when trading what would they be?

   1. s/r levels/ pivot points
   2. trend lines
   3. candle stick patterns
   4. chart patterns
   5. certain indicator
   6. fibonacci
   7. elliot wave
   8. time frames – fractals

Would interested to see your view on this.

I use 1,2 & 4 with a little of 3.

5. In your experience what parameters would you set up bollinger bands and what time periods are most effective using them? I would also like to have another confirmation with a slow stochastic to increase odds of the trade. I hope this makes sense. Thanks for taking question.

   I’m actually not a big user of Bollinger bands. While I have experimented with them a bit, I haven’t found anything that really works for me.

6. What technical indicators do you use to make the decision to enter/exit a stock? And how do you use these indicators?

   When I was day trading – price and level II was all I used.

   With position/swing trading – support/resistance levels are used to gauge price action or trends, with some chart patterns and candlesticks to round out the analysis.

   I enter and exit based on how price reacts around key price levels.

7. In trading, the mantra goes “Cut your losers short, and let your winners run.” So, I have a pretty good feel of cutting losers short at a pre-determined level, but how do you get out of winning trades and feel like you’ve gotten most of the goodie out of it? I’ve closed trades at 100% return, only to watch would have been profits run much higher.

   There’s actually only 1 person I know who has (or is extemely close) to figuring out how to get out at THE very top or bottom of a trade… barring that, there’s 2 things I’d suggest.

   1. Use trailing stops as a means of allowing trades to progress and close out only when the market has indicated vs you picking a point to exit.

   2. Keep a trading journal and access whether you closed out a trade because your strategy dicatated it or you were afraid of losing paper profits. The aspect of “feeling good” about it, is really subjective. I learned early on that if I followed my strategy and exited where I planned then I should feel good. The fact that the market continued to move further than expected was beyond my control. But making yourself feel bad while executing your strategy as planned will only get you doubting yourself more and more.

8. Often in trading I use the Stochastics and the %R, combined with moving averages and some information about buy and sell pressure they give a pretty accurate picture of what is happening and help me choose to enter a long or short position.But equally often I had the trade going against me because instead of continuing to leave the oversold or overbought position the indicators returned below or above their respective 20 and 80 lines and stayed there quite a while and generating huge pip/tick amounts. Is there a tool, indicator,analysis which can help me to determine that the market will stay in its oversold or overbought position(after having given first a false change of direction signal) ?

   It sounds like with all the indicators you’re using you’re having about a 50/50 odds of getting into a winning trade.

   That said, if you can simply keep your winning trades larger than your losses, you’ll be fine.

   As per another tool to increase the accuracy of those indicators, I’m not sure if adding more is really the key.

   The only suggestion I would make is to try your analysis on multiple timeframes… using the same approach you have take a look at the next timeframes up. So if you trade daily, take a look at weekly charts, if you trade hourly take a look at 4 hour or daily. Apply your analysis there and you may see that things happening on the higher timeframe that contradict your lower level analysis.

9. My question:
   In my situation I kinda have 2 options:

   A. I choose the best looking trading system. The disadvantage imo is that There is no spreading risk. The advantages are that I have a clear overview and that I don’t need micro lots

   B. I choose different trading systems. The advantage is spreading risk and the disadvantage is a messy overview of the trades. It’s also more work and with my budget I need micro lots.

I would lean towards “A”, and find a system that fits your trading style and personality. In other words does the trades it triggers match your philosophy of the market, do the trades make sense to you, are you able to follow the trades generated, etc…

If you can do this successfully you don’t really need additional strategies, but if you wanted you could always then look for more to integrate into your main approach.

I think trying to trade multiple systems at once is too tough, and in the end I think all it will do is scatter your focus and delay your progress.

10. Which of EUR/USD or GBP/USD is generally the more lucrative pair to trade?

    Going solely from faulty memory I believe the GBP/USD is more volitile and has larger moves, so with the same margin requirments it would make that pair more lucrative.

    I tend to follow the EUR/USD because of it’s more favorable spread.

    I think both pairs would offer an equivalent number of opportunities… I’m not sure what else you might mean by lucrative.

11. Followup question: When generally are the best times to trade EUR/USD and GBP/USD?

    About an hour before the London open… which I BELIEVE is about 3am EST (that’s the time I watch, you’ll have to translate it to your timezone.)

    And if want volitility watch for news releases (but be wary of trying to trade news because of fast markets and slippage.)

12. about the fibnocci on the chart the calculation entry point and target

    I guessing you’re asking about how to use Fibonacci for entries and targets.

    This is really not my area of expertise, as I never traded with Fibonacci at all. I’ve only been recently turned on to it as I’ve been working with a guy who can do some pretty remarkable things with it.

    That being said, I really am not equiped to provide any suggestions in this area… sorry.

13. How do you use a trailing stop order if you think the stock will go up or down? What is a trailing stop order?

    Ok, I’ll answer what I think the question is.

    First off a “stop order” is an order that gets triggered into a “market order” WHEN the price reaches a price level you define.

    For example if I place a “buy stop” for 10 shares of XYZ stock at $100, when the price touches $100 my order will become active at the market and I will get filled at the prevailing market price. So if the price is rocketing up and hits my buy stop order, and continues running up, I may be filled at $100.25, $101, $102… anything depending on the market.

    Now a trailing stop order is essentially an order you “trail” or move along with an existing trade as a means of closing out out that trade.

    So if I got into XYZ at $100 I may have a trailing stop of $2, so if it goes to $101, my trailing stop will be $99, if it goes up to $102, my trailing stop is $100.

    Now a “trailing stop” is not necessarily a feature your broker will have… and asking them to do a trailing stop may be met with confusion. The fact is a trailing stop is simply the process of moving your stop loss as price moves.

    So if your broker happens to have a trailing stop functionality, you can use that, otherwise you will simply move your stop manually as the market moves.

Categories: Trading

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