The Toxic Culture of Oscillators/Indicators and Why Contribute to Your Failure As an E-Mini Trader
From the onset, let me make it clear that there is a time and place to use indicators/oscillators in your career as an e-mini trader.
Having said that, I would also like to make it clear that I believe indicators and oscillators are misused and misapplied at an appalling rate, and the misapplication of these tools is a major cause for the skyrocketing failure rate among beginning e-mini traders.
I was chatting with a prospect on the telephone today and he decided to give me a little pop quiz to show me that he had a working knowledge and mastery of it e-mini trading.
"Do you know how to use the Stochastic indicator?" he queried.
"Yes," I responded, "It was developed by George Lane in the mid-50s...
" and I continued with a short history of the indicator.
Note: Many trading historians dispute George Lane's claim to have invented the stochastic indicator.
"Oh," he said, sounding disappointed.
"How about the ADX?" "Well, the ADX is a good portion of Wells Wilder's DMI," I started, and continued with a similar historical rendition as the questions regarding the Stochastic indicator.
We played this little back-and-forth game until the prospect and decided that I knew a little bit about indicators/oscillators.
Then it was my turn, and I asked the caller what criteria he used in choosing potential trade set ups.
As you might expect, the caller was very knowledgeable about indicators/oscillators and described several indicators/oscillator setups.
The caller was shocked when I asked him if he had ever considered reading of the chart and price action to determine potential trade setups and then utilize his oscillator and indicator choices to confirm his trade.
This was a technique he was unfamiliar with.
Finally, I chose to ask whether or not he was a successful trader.
I do this for a number of reasons; the most important is trying to avoid wasting a highly successful trader's time on the telephone.
If a trader is already doing well, he certainly doesn't need me wasting his time and vice a versa.
On the other hand, if the trader is a veritable encyclopedia of indicator and oscillator knowledge and still doesn't trade successfully then some adjustments in both trading philosophy and trading technique are in order.
This leads me to the theme of this article; E-mini trading is a relatively new trading form and has only been practiced, in earnest, for the past 10 years.
Over that time span, trading educators have put together trading methodologies which are easy to duplicate and give a new trader a sense of ability which may be misplaced.
As a longtime institutional trader, I can tell you that retail e-mini trading (trading as practiced by beginning and/or novice traders) bears few similarities to the trading techniques taught at higher levels.
Why? It is my opinion that many trading educators are self-taught and have passed their style (which is generally oscillator or indicator based) on to new students through their trading curriculums and methodologies.
All indicators and oscillators lag in nature and give trading signals that are delayed.
Trade entry is one of the most critical moves, and a timing sense, and e-mini trading.
Getting into a trade late is an undesirable action and yet the majority of new students are taught to trade upon this very principle.
This methodology is so flawed that, in my opinion, it causes a great deal of failure and frustration.
Eventually, this failure and frustration leads traders to an early exit from the business.
It has been my goal to teach traders to work with real-time data and make decisions based upon that real-time data.
Obviously, the difference in the success rates is startling; and many of the students who have converted from lagging indicators to real-time data are amazed at the difference in their overall rate of success.
In summary, I have talked some about oscillators and indicators and the delayed trading signals that they generate.
I have suggested that real-time signals allow a trader to experience a higher rate of success.
While I have not summarily dismissed indicators and oscillators, I have tried to relegate them to a role that they are very useful; as instruments to filter out the bad trades.
Under no circumstances, do I encourage traders to use these instruments as primary tools and determining trade setups.
Having said that, I would also like to make it clear that I believe indicators and oscillators are misused and misapplied at an appalling rate, and the misapplication of these tools is a major cause for the skyrocketing failure rate among beginning e-mini traders.
I was chatting with a prospect on the telephone today and he decided to give me a little pop quiz to show me that he had a working knowledge and mastery of it e-mini trading.
"Do you know how to use the Stochastic indicator?" he queried.
"Yes," I responded, "It was developed by George Lane in the mid-50s...
" and I continued with a short history of the indicator.
Note: Many trading historians dispute George Lane's claim to have invented the stochastic indicator.
"Oh," he said, sounding disappointed.
"How about the ADX?" "Well, the ADX is a good portion of Wells Wilder's DMI," I started, and continued with a similar historical rendition as the questions regarding the Stochastic indicator.
We played this little back-and-forth game until the prospect and decided that I knew a little bit about indicators/oscillators.
Then it was my turn, and I asked the caller what criteria he used in choosing potential trade set ups.
As you might expect, the caller was very knowledgeable about indicators/oscillators and described several indicators/oscillator setups.
The caller was shocked when I asked him if he had ever considered reading of the chart and price action to determine potential trade setups and then utilize his oscillator and indicator choices to confirm his trade.
This was a technique he was unfamiliar with.
Finally, I chose to ask whether or not he was a successful trader.
I do this for a number of reasons; the most important is trying to avoid wasting a highly successful trader's time on the telephone.
If a trader is already doing well, he certainly doesn't need me wasting his time and vice a versa.
On the other hand, if the trader is a veritable encyclopedia of indicator and oscillator knowledge and still doesn't trade successfully then some adjustments in both trading philosophy and trading technique are in order.
This leads me to the theme of this article; E-mini trading is a relatively new trading form and has only been practiced, in earnest, for the past 10 years.
Over that time span, trading educators have put together trading methodologies which are easy to duplicate and give a new trader a sense of ability which may be misplaced.
As a longtime institutional trader, I can tell you that retail e-mini trading (trading as practiced by beginning and/or novice traders) bears few similarities to the trading techniques taught at higher levels.
Why? It is my opinion that many trading educators are self-taught and have passed their style (which is generally oscillator or indicator based) on to new students through their trading curriculums and methodologies.
All indicators and oscillators lag in nature and give trading signals that are delayed.
Trade entry is one of the most critical moves, and a timing sense, and e-mini trading.
Getting into a trade late is an undesirable action and yet the majority of new students are taught to trade upon this very principle.
This methodology is so flawed that, in my opinion, it causes a great deal of failure and frustration.
Eventually, this failure and frustration leads traders to an early exit from the business.
It has been my goal to teach traders to work with real-time data and make decisions based upon that real-time data.
Obviously, the difference in the success rates is startling; and many of the students who have converted from lagging indicators to real-time data are amazed at the difference in their overall rate of success.
In summary, I have talked some about oscillators and indicators and the delayed trading signals that they generate.
I have suggested that real-time signals allow a trader to experience a higher rate of success.
While I have not summarily dismissed indicators and oscillators, I have tried to relegate them to a role that they are very useful; as instruments to filter out the bad trades.
Under no circumstances, do I encourage traders to use these instruments as primary tools and determining trade setups.