I'm trying to decide which one to use. I also noticed that sometimes there is a divergence between these indicators.

Thanks

asked Apr 13 '12 at 19:46

dreamtalk's gravatar image

dreamtalk
1.4k 4561


Good question. I asked myself the same thing a few years ago before there was SCAN.
Of the 5 indicators you listed, I settled on OBV.
Why?
Because I understood it's construction and behaviour. The other is Force Index. But you did not include this.
But with experience, I use fewer and fewer indicators.
I'm using only pure price indicators now.
And my relentless quest for dropping indicators continue.
A man with one watch is always sure of the time.
A man with two watches is never sure.
I guess I handle divergence by reducing the number of indicators :-)

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answered Apr 13 '12 at 20:03

Petero1298's gravatar image

Petero1298
519 15

If I may add to my earlier comments.
I find MACD and RSI divergences to be the more reliable.

Not sure if I'm being fair to volume based indicators but the following are my concerns;
a. modern day "dark pools" reduce the volumes traded in the exchanges.
b. algos trading exaggerate the amount of volumes traded in the exchanges.
c. Therefore ... why introduce a "known unknowable" into my analysis. ...
d. In the end ... only price pays. Not MACD, RSI or volume.

One watch (indicator) is not necessarily more accurate than two watches.
But when that one watch is not synchronizing well with prices, I notice straight away.
With two watches, I get into paralysis by analysis. A bad place to be if I'm in a day trade position.

(Apr 14 '12 at 20:50) Petero1298 Petero1298's gravatar image

Nimal: I worked up two time frames on three charts on USO, the first is a daily and the second is a 60 minute with three months on it and the last is a 60 min with one month on it. You will see some annotations on the larger daily chart, and then many of the same annotations on the 60 min charts plus a couple more added to the smaller price moves. You can see the daily has some MA's not on the 60 min but the 60 min chart has some more detailed annotation plus the annotation from the daily. For me this is easier.

alt text alt text alt text

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answered May 08 '12 at 23:20

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Windsurf
10.2k 196148

edited May 09 '12 at 02:35

I'll create awareness of the fallacies of the three above mentioned indicators. These include:

  • a gap down open followed by an attempt to fill the gap the rest of the day
  • a candle in which today's close differs by yesterday's close by 1 cent.

Intuitively speaking a gap down with a close higher than open but lower than previous close should be negative volume (because price close lower), but CMF will treat it as a positive volume.

Secondly, if a candle's closing price today is a few cents from the previous day's close (say for a stock of at least $20), it's volume effect should be diminished because price doesn't change much. However, neither OBV and MFI have this diminishing effect.

That's not to say these indicators are not useful but one has to account for its limitations.

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answered Apr 15 '12 at 08:06

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ekwong
8.3k 13039

edited Apr 15 '12 at 08:08

I'd like to use OBV except I trade from Daily and 60 minute charts and try to annotate both charts identically so when I switch from Daily to 60 min all the trendlines, etc are still in place. But because the OBV on the 60 min chart seems to be calculated by each 60 min period the lines on the daily and 60 min are not identical. So sometimes a divergence will show on one chart that doesn't show on the other.

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answered May 08 '12 at 00:10

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Windsurf
10.2k 196148

Can you please explain how you annotate daily and 60 minute charts so that they are in line. Thanks

(May 08 '12 at 10:23) nimal nimal's gravatar image
1

Nimal: I set the time period of each chart the same and then annotate them exactly the same so when I reset the time periods (shorter on the 60 min) I can see the same annotation that I would see if I were looking at the daily. I primarily trade off the 60 min but I know I have to be aware of what is happening on the daily since the market generally trades off the daily or longer. Sometimes when I just look at the daily chart I miss translating a point of importance in my mind to where it would be on the 60 min chart. This way all the important lines are on the 60 min chart and yet I can put fewer days on the 60 min chart to see the smaller moves more easily.

(May 08 '12 at 12:11) Windsurf Windsurf's gravatar image

Windsurf Thanks. I still need to clear something. I know OBV does not have a set parameter unless you add a moving average to it. Let us say I add a MA of 14 to OBV and use slow stoch 14,3 on the daily. Now if I want to look at the 60 mnt chart, do you still use the same settings ie OBV 14 and slow stoch 14,3 or do you convert them to 60 mnt by multiplying 14 and 14,3 by 6.5 ie 91 and 91,19.5 Thanks

(May 08 '12 at 13:01) nimal nimal's gravatar image
1

nimal: Good question. I only sync the annotation lines on the chart and not the indicators. I could be making a mistake but the indicators are telling me what is happening in that specific time frame. So a divergence or a cross on an indicator in the 60 is just calling a move in the 60. If I want to see what is happening on the daily I switch to a daily chart. I know that sounds inconsistent but it seems to work for me.

(May 08 '12 at 13:21) Windsurf Windsurf's gravatar image

Windsurf, Will be kind enough to post a couple of charts so that I will be able to understand better.

(May 08 '12 at 18:45) nimal nimal's gravatar image

This is my two cents. I have been strugling with various indicators for a long time trying to find out which ones are better. My experience is that none of the indicators is good. I have now settled down to OBV and slow stochs and of course volume. I am a short term trader and I always try to follow the price and volume. Hope this will help.

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answered May 08 '12 at 18:51

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nimal
393 1219

nimal: Sometimes it isn't the indicator but the one that speaks to you. I have tried to use ADX a couple of times I understand the basic ways to read the indicator but it just doesn't speak to me clearly But others seem to tell me where a trade might be just because of how I see it. So it might not be the indicator for you. Find the one that gives you confidence in the trade.

(May 08 '12 at 21:27) Windsurf Windsurf's gravatar image

Thank you. By the way how do I vote. I do not see a button to click.

(May 09 '12 at 09:43) nimal nimal's gravatar image

Two ways to vote. For answers you click on the thumbs up or thumbs down button to the left. For comments there is a very small thumbs up button to the bottom right of the comment next to the name. To accept an answer (I think the max is two answers per thread) there is a check mark icon to the left of the answer just under the thumbs up and thumbs down icons.

(May 09 '12 at 10:12) Windsurf Windsurf's gravatar image

Great. It is done. Thanks

(May 09 '12 at 18:49) nimal nimal's gravatar image
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Asked: Apr 13 '12 at 19:46

Seen: 2,859 times

Last updated: May 09 '12 at 18:49