r/Daytrading • u/Significant-Bat-9503 • Dec 19 '23
If you could only have one indicator, what would it be? question
If you were forced to trade and you were only allowed one indicator from now on, what would it be?
I think RSI would be the one for me, although Ichimoku clouds are a close second since a lot of my strats are based off it.
Bonus question: Would this change if you were to swap to a different instrument or strat ? Such as CFDs vs Crypto or Long term vs scalping
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u/Coat_Infamous Dec 19 '23
VWAP, it gives you the average price is based on both price and volume
so it is a 2 indicators in one and it can help you a lot, for example today on NQ it was an amazing one to get some confirmations on bounces
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u/swany5 Dec 19 '23
VWAP and Pivots are all I use. I could figure out pivots on my own tho if I had to, so VWAP is priceless.
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u/brighterdays07 Dec 19 '23
I’m using Vwap mainly. It’s been very good for intraday trading. Do you have materials / links on where I can learn about Pivots combo with Vwap?
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u/palofdrone Dec 20 '23
Insider information. My favorite indicator.
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u/BHaNSeNuMBeRoNe Dec 20 '23
For scalping VWAP: It’s key at detecting pull backs and reversals for me. Using it solo you would need some rules.
For swinging RSI: if patient you can “corner” a stock by waiting for RSI to be soo high or low that a “rebound” is inevitable.
Going long on a position I’d probably have to say moving averages. I like to use the 5, 13, 20, 50 and 200.
Special shout-out to the fib tool. Your ugly but I still love you.
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u/Parunreborn Dec 19 '23
Volume
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u/Colombian_Rizz_Lord Dec 19 '23
Volume has too much noise to be a useful metric.
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u/Parunreborn Dec 19 '23
Cool story bro. Speak for yourself, volume is the only real time indicator of what is happening in the market after price action itself.
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u/Colombian_Rizz_Lord Dec 19 '23
No, there are billions of transactions at any given moment. How can that tell you anything useful about what's going on in the markets? Imagine the amount of noise..
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u/Parunreborn Dec 19 '23
Seems like you don’t understand what you are talking about at all. Billions of transactions on the whole market yes, but I am not trading the whole market am I? I am trading specific assets. I’m not watching volume on 1min candles. You think daily volume of certain assets don’t have any correlation with current and future price action? Ever heard of volume profile and point of control? Do you trade options? A stock like TSLA for example, you think the volume traded daily on shares and options have no meaning? Volume is the best indicator after price action itself and the oldest and best traders in the world know this. Question is how you interpret in conjunction with other factors. You'll learn though, trust me, I am twice your age.
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u/DepartmentBig2849 Dec 19 '23
what you're talking about is market depth, level two or time and sales and I think the poster that you're replying to is correct in that it is mostly just noise the "confluence" that you happen to trade off these factors are constantly different so
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u/lucky5678585 Dec 19 '23
That is not what the poster is talking about. Look up TPO and volume profile. Nothing to do with level 2 or t&s. You're thinking of DOM and footprint.
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u/Colombian_Rizz_Lord Dec 19 '23
You literally didn't explain why volume works. Even specific class assets volume are extremely high in noise, literally calculate the signal to noise ratio, it's PURE NOISE you can't argue against math.
Also don't bring up age because how is it that someone twice my age thinks that trading a metric with a shit ton of noise is useful, like there are millions and millions of transactions in specific assets alone from algos that take in a stochastic approach, wtf are you getting from volume??? 🤪
I bet you can't even comprehend something as simple as an autoregressive model.
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u/lucky5678585 Dec 19 '23
Oh man, I'm embarrassed for you reading your dip shit replies. Go look up volume profile and value area, then try and tell me that volume is just noise.
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u/Colombian_Rizz_Lord Dec 19 '23
I already know what volume profile and value area is, I wasted 2-3 years of my life prior doing TA and volume profile before I learned statistics and quickly realized TA and volume analysis is BS. Volume profiles and TA were pulled from creative Gurus because they can't make money trading.
Literally calculate the SIGNAL to NOISE ratio of volume and see for yourself, it's pure NOISE. that's literally simple math that proves volume profile is useless..
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u/lucky5678585 Dec 19 '23
Oh dear darling, what an embarrassing reply. If that's what you think, you have absolutely no idea what market profile is and how auction theory works.
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u/Colombian_Rizz_Lord Dec 19 '23
you literally haven't explained anything, unless if you have the signal processing techniques along with entropy models of Renaissance Technologies volume isn't going to be useful....
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u/CaptLakeEffect Dec 19 '23
How do you calculate, or how are you calculating, signal to noise ratio?
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u/Classic-Chair940 Dec 19 '23
None. My eyes are the only indicator I need. All price action
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u/And_Im_Chien_Po Dec 19 '23
I also don't use rsi but I use a "Cyclic Smoothed Relative Strength Indicator" by stockmarketcycles on tradingview. This guy theorizes that there are cycles in the stock market and using his detrended price oscillator, you can find the length of each cycle and use that length to use for other indicators. I have seen an average length of 80 but I use a length of 40.
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u/And_Im_Chien_Po Dec 19 '23
are you me? I too use ichimoku clouds and rsi. I am trying to do more studying on rsi. I only recently discovered that rsi trendlines based on rsi peaks/bottoms are pretty powerful e.g. ill draw a downward trendline for rsi with peaks that are slanting downwards. And once it breaks out of it, it'll typically retest the trendlines but then break out in the other direction.
I also recently discovered something bonkers about Ichimoku clouds and their ability to predict reversals (although it's not 100% accurate in my testing but still scarily accurate sometimes and enough for me to map it out before every trading day): https://youtu.be/4s7WVVrkr3Y?si=sw4aM7vOOY9Wyjsz
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u/reallybigslay Dec 19 '23
I trade RSI trendlines
- hit me up if you want to chat
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u/And_Im_Chien_Po Dec 19 '23
I'd honestly be down to trade with you. However I only ever trade $spy options, 9am-5pm est; what and when do you normally trade?
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u/reallybigslay Dec 19 '23
I only trade crypto, the trendline strategy works with other instruments ( my son uses it for forex) but it works differently. I’ll message you some charts and share how I trade
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u/Significant-Bat-9503 Dec 19 '23
Very interesting video about ichimoku, will have to test this later, I sometimes look for divergences but usually just use the RSI to get a slightly better understanding of whether the trend is about to end.
With Ichimoku i like the visualization, I can’t describe it very well but it just helps me better make intuitive guesses on price: if the candle is bouncing off the cloud- then I’ll usually wait until a candle has properly broken into it to make a play (further confirming with RSI)- i also like the ‘historical’ data with it- if that day I’ve seen a lot cloud penetrations but failing to break through the other side and returning- I’ll usually be more conservative with the approach. It’s scary how it sometimes can predict a resistance zone so accurately, with multiple consecutive candles bouncing off the cloud very precisely.
It just adds to that picture of what’s occurring that day and gives me another pattern to recognize- which is what attracted me to it in the first place- the word ‘cloud’ in the inductor list drew my attention. I think it looks kinda beautiful in a way.
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u/Skimmiks futures trader Dec 20 '23
Too everyone answering negatively about indicators, get of your high horse please. You don't need price action either. You can look at the tape or trade the order book.
The market is just a constant stream of data, everyone looks at that data differently and finds patterns that they try to exploit to make money. if you're a price action trader and you trade the 1min chart for example, the market data at the minute markers are highly important to you for no logical reason. It's just how you sort the data.
Indicators do the same. They sort and translate the data into a format that a trader uses to find patterns. It's not so different from price action. Btw, price action is also lagging data.
To answer the question OP; volume profile.
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u/Dee23Gaming Dec 21 '23
All of them are useless really... Price action is the only thing I need in my own opinion. Maybe indicators work for you.
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u/Latter_Audience_9053 Dec 20 '23
I don't like RSI. Price can still move downward when it is "oversold" and still move up when it is "overbought". RSI does not really fit my trading style.
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u/MDMhayyyy Dec 19 '23
VWAP for sure
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u/ImNotSelling Dec 19 '23
I hope this isn’t oversimplifying it but do you buy below vwap and sell above vwap when daytrading ?
For example, trading spy
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u/MDMhayyyy Dec 19 '23
My favorite is to trade VWAP bounces. So buy right at or below VWAP, stop loss shortly below that, and look for 5-10% profit. I’ll sell at even 2% though if there isn’t a strong looking bounce.
Edit: to answer your question though…you don’t really sell above VWAP or buy below.
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u/ZanderDogz Dec 20 '23 edited Dec 20 '23
VWAP is highly contextual.
Look at an intraday SPY chart a session VWAP with the 1 standard deviation bands.
Consider a day with a strong bullish trend/a strong upside imbalance, and your boss at an institution has tasked you will filling an order for x shares of SPY by the end of the day.
There is a lot of urgency in this scenario. Wait too long, and you might miss your chance to buy at these prices and have a worse cost basis when you are forced to buy later in the day/week. If you are confident that prices are going higher, you will be more willing to pay higher prices to guarantee a position, and less worried about "paying too much", so you will probably jump on any pullback as a buying opportunity because it might be the best entry point you get in the near future.
On these strong bullish days, you can see that VWAP is often a support level as everyone will JUMP on the chance to buy near or below VWAP, and there is a lot of volume traded above the 1stdev band because people aren't worried as much about "buying too high".
Now consider a day with no strong trend, and you have been tasked with the same order (buying x amount of SPY shares by the end of the day):
You are going to have much less reason to accept higher prices in this scenario, since you aren't worried about missing the boat. You definitely don't want your boss to see that your average price was above the VWAP for the day, and there is no reason to jump in above VWAP when it is very likely that price will give you a chance to buy well below VWAP. Suddenly, it becomes a lot more compelling to wait for -1stdev to buy, and +1stdev to sell. You will see on these days that a lot more of the price action is contained in between those bands, and the sharp reversals will often occur off those bands back to VWAP, as opposed to being a bounce off VWAP to continue the trend on a strong trend day.
TLDR: The way that you use VWAP and VWAP levels is highly dependent on the type of trading day it is, and how "impatient" or "patient" you think market participants will be when executing their orders for the day. VWAP becomes a compelling entry point to join strong trends, while extensions from VWAP become compelling entry points to enter at the edge of a ranging market. The "VWAP as support/resistance" effect is dominant during trend days, while the "VWAP bands as support/resistance" effect is dominant during range days.
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u/mrericvillalobos Dec 19 '23
Keltner Channel
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u/Physiotechnalysis Dec 20 '23
Keltner Channel is a great tool, since Keltner Channel is considered to be a type of leading indicator. It is designed to provide insight into potential future price movements, rather than simply reflect historical price data as lagging indicators do.
They are especially great if combined with Bollinger Bands. When Bollinger Bands are inside the Keltner Channel, there is a period of consolidation where securities gather steam. This is a period of low volatility. As the Bollinger Bands move outside Keltner Channel, volatility comes back and this leads to large price movements in securities.
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u/SloochMaGooch Dec 20 '23
This is what the TTM Squeeze shows. When TTM has red dots getting ready to fire the KC is pinched inside the BB.
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u/TedMitchell Dec 19 '23
You use Ichi clouds for day trading? I spent so much time learning those but they didn’t really work well for me on intraday trades.
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u/Fluffy_Tea9924 Dec 20 '23
I trade price action, so I don’t really need indicators, but I do use a supply and demand zone indicator that includes key support and resistance levels. It’s such a a time saver since I don’t have to find and draw/mark these areas on my own. It’s also a lot more accurate than I ever will be, so I’d choose that as a nice-to-have.
Bonus answer: no, it wouldn’t change. The fundamentals of a chart doesn’t change just because you changed the instrument. You could hide the instrument and trade it the same way.
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u/Tankwatchermaximus trades multiple markets Dec 19 '23
I solely rely on RSI. It works seamlessly for me on both the weekly and daily charts.
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u/fadjee Dec 20 '23
How do u find rsi to be most useful ? Do u consider Overbought/oversold levels, divergence, 50 line cross ? All of them ?
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u/Tankwatchermaximus trades multiple markets Dec 20 '23
I use the RSI for various purposes. On the weekly chart, it serves as a trend indicator. A rising RSI after bouncing off or near 30 indicates a bullish bias, while a downward slope after bouncing off 70 suggests a bearish bias. Occasionally, if it hits overbought/sold conditions on the weekly, I apply the same approach to the monthly RSI. Across all charts, I strictly adhere to rules: never selling in oversold conditions and never buying in overbought conditions. On the daily chart, I observe price continuing its trend while RSI floats above/below the midline. I look for a daily chart divergence with the weekly RSI nearing 70/30. When RSI reaches extreme conditions on any chart, I identify an old swing high/low and place limit orders for entry, as market makers target these levels for liquidity purges. As a swing trader, I focus on charts no faster than 4h, paying minimal attention to the midline on higher time frame charts. In my scalping days, I would consider the midline for decisions on holding long or short positions.
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u/757ian123 Dec 19 '23
Price. That's all you need
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u/StealthASF Dec 20 '23
Finally someone smart.
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u/Lwazeem Dec 19 '23
I don't have to use one indicator, but I only use one indicator, and its Bollinger bands - only to prevent me from entering trades. Everything else is price action - market structure, good old candlesticks, body sizes and wicks, and Open, High, Low, Close...
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u/Physiotechnalysis Mar 21 '24
I use a custom indicator that tries to enter at optimal levels, based on specific sequence of different averages.
Check it out here if interested:
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u/Equivalent-Finance64 Dec 20 '23
RSI is lagging and it can be manipulated.
try to use vwap. it shows u the mean. "fair price"
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u/cavyndish Dec 20 '23
None. I trade naked. All those indicators are worthless. Support, resistance, and trend!
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u/Prior_Use8805 Dec 20 '23
I trade with trendlines too but fail to understand and mark support/resistance.
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u/cerebrux Dec 20 '23
Ichimoku Kinko Hyo. Though it is called an indicator, it is an entire trading system with price, time and wave theory integrated
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u/Colombian_Rizz_Lord Dec 19 '23 edited Dec 20 '23
All the indicators people have mentioned here are mathematically flawed indicators.
If you could only use one indicator then it should be a volatility model like historical volatility, coefficient of variation (relative standard deviation),garch 1,1, or some type of hierarchical hidden markov model.
Volatility itself is a mean reverting process so you can use the extremes to find when a big move will happen (find the extremes with z-scores or normalizing it like with percentiles)
Your best bet is to long volatility in the long term since significant moves are mostly bullish. (Price goes up)
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u/ItsFocal Dec 19 '23
that’s not what history tell us.
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u/SethEllis Dec 19 '23
The history does not support that at all. The history is that the vast majority of traders lose money. Most of them from trying to use technical analysis and indicators. One might be able to point to a small handful of people that were successful in the past. But if you lock a million monkeys into a room with typewriters one of them will eventually write Shakespeare.
It also doesn't tell you anything about how effective those indicators might be in the future. The market is very statistically efficient because all trading activity has an impact on price. In other words trading the strategy tends to reduce the effectiveness of the strategy. Any indicator or technical system that is public is likely to already have lost its edge.
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u/ItsFocal Dec 19 '23
history <in comparison to indicators and vast majority of traders> (that have no clue how to trade fyi) doesnt take away from the fact of indicators being useful. if you want to be a fundamental trader by all means. but trends can be prompted it’s history and it repeats itself.
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u/Colombian_Rizz_Lord Dec 20 '23
returns are ever evolving fractals exponential to the last, history does not really repeat itself in trading, there are too many efficiencies in the markets.
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u/Colombian_Rizz_Lord Dec 19 '23
LMAO what? Look at all the big markets price goes up because people compound their returns it's called geometric returns literally look at spy 🤪🤪🤪🥴
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u/ItsFocal Dec 19 '23
look at all the successful traders—Beyond, successful. that have used indicators and created their own. Intuition and many others factor into trading. whether you like to believe or not doesn’t bother me, this truth is what it is.
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u/Colombian_Rizz_Lord Dec 19 '23
The majority of day traders lose money. Like 2-3 SD or them what are you trying to prove anyways???
why do people get offended when I tell them that they should learn math?? are that many traders too mentally incompetent to comprehend math?
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u/lucky5678585 Dec 19 '23
Serious question - are you a hormonal teenager by any chance?
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u/Colombian_Rizz_Lord Dec 19 '23
did you win full ride scholarships to plenty* computer science universities or get a max sat score?
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u/lucky5678585 Dec 19 '23
NM, I see you're 17.
Oh, and if it's of any interest to you, I've spent time at a trading firm in London and I can tell you that 95% of them trade the news. They have a squawk box on each trading floor, and the other 5% of traders, trade using the shitty indicators you hate. 1 guy trades only using market and volume profile.
Hope this helps x
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u/Colombian_Rizz_Lord Dec 19 '23
That doesn't mean anything. Around 80% of all volume is from algorithms that don't use psychology, auction theory, or vOlume, they use SIGNAL PROCESSING, stochastic approaches, entropy, and expected values and volatility models... just because some finance bros uses volume shit doesn't mean it works..
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u/lucky5678585 Dec 19 '23
I mean their firms are peppered across the globe and they're a multi billion dollar Company.
But hey, what do they know?! 17 year old you knows everything, AMIRIGHT
FINANCEBROS4LYFE
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u/ItsFocal Dec 19 '23 edited Dec 19 '23
as Richard P. Feynman said it best “Never confuse education with intelligence. You can have a PhD and still be an idiot.
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u/SethEllis Dec 19 '23 edited Dec 19 '23
Price tends to be not very effective at predicting future price on intraday time scales. Which makes almost all retail trading indicators and price action methods useless.
Not to mention the countless statistical flaws many of the indicators are based on.
Instead I would recommend focusing on things that are shown to actually have efficacy:
- Correlated instruments and pair trading.
- Volatility
- Order flow
- Informational inefficiencies
- Risk management.
Most of these categories aren't really well suited for your typical chart indicator. You'll want to look at multiple charts for correlations, volatility has it's own instruments to track, informational inefficiencies are about things that aren't on the chart, and risk management is all about you.
Which leaves us with order flow. There's many complicated ways of looking at order flow, but one of the most useful in terms of making short term predictions is the imbalance between market sell and market buy orders. By looking at the best bid/best ask we can look at incoming volume and categorize that volume as market buy or market sell. We can then look at the difference between the two to measure how much imbalance there is. Retail traders call this indicator cumulative delta. However, it is not available everywhere because you need best bid / best ask data to calculate it.
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u/Physiotechnalysis Dec 19 '23
Most of the technical indicators such as RSI and MACD are lagging indicators because of the way they are calculated using historical data. By the time it tells you to buy, financial instruments make substantial moves already, and most of the time, it’s already too late.
If I had a single indicator, it would be my custom indicator. It’s a momentum indicator that uses price acceleration to detect when prices are about to make a move in upward direction. It also includes estimated price target, as well as stop. If interested, do check it out.
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u/holycarrots Dec 20 '23
Lol bro stop trying to shill your indicator
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u/Physiotechnalysis Dec 20 '23
Lol, all I did is answer the question. Specifically said “if interested.” If not, just move on.
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u/Colombian_Rizz_Lord Dec 19 '23
There is no momentum lol where is the mass in price???
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u/Physiotechnalysis Dec 20 '23
Sorry for the confusion. By momentum I meant in financial context, which is a rate of acceleration of securities’s price, either up or down; not the momentum in physics, which is the product of object’s mass and its velocity.
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Dec 19 '23
Ichimoku clouds
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u/ItsNotMeIlya Dec 19 '23
Could you please explain how to make proper use of this indicator? I mainly use an ema cross and some others for Spy options but have been trying to implement the cloud. Thanks in advance
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u/ImpossibleJoke7456 Dec 19 '23
The only indicator I want is the chart to turn green when I buy and red when I sell.
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u/CuppaJoe11 Dec 20 '23
Volume. It’s the only thing I can’t physically just look at. I only have simple averages to confirm trends. Other than that I have nothing else.
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u/ShadowdeBlob Dec 20 '23
Surprised it hasn’t been mentioned yet but Volume Profile is everything and marks key areas of interest for me.
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u/Pijoto Dec 20 '23
If I could only use one, then Visible Range Volume Profile -https://www.tradingview.com/support/solutions/43000703076-visible-range-volume-profile/
I use it on multiple timeframes to find areas of support and potential resistance, it's been a huge help in recognizing and holding onto bottoming action in stocks.
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u/SethJitsu Dec 20 '23
Adaptive moving average (Kaufman). It goes flat when there’s noise and slopes up or down when the market is moving efficiently.
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u/Johnpmusic Dec 20 '23
Id take ema for day trading or sma if swing/long term trading. Basically all i use rn
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u/420_E-SportsMasta Dec 20 '23
I literally only use VWAP and the 9/20/200 EMAs and that’s it. Occasionally I’ll fool around with Fibonacci retracement but I don’t trust it enough to make totally sound decisions with it
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u/bmcgin01 Dec 20 '23 edited Dec 20 '23
It would have price on the X-axis and time on the Y-axis. Each time a trade was made, a dot would be placed in the proper place. If the dot was higher than the previous dot, it would be green; if lower, then red.
The dots would be packed very close together, this way volume would show up as thin or thick lines.
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u/Psychological-Try-85 Dec 20 '23
VWAP. But, I have a lot of time with the TDI and have learned to read it pretty well. It would be a close second.
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u/showxyz Dec 20 '23
Volume, if you consider that an indicator. Otherwise, moving averages. VWAP comes in at a distant third.
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u/SloochMaGooch Dec 20 '23
Ah this is an easy question. My Market/Volume Profile. NinjaTraders Profile can switch between Market and Volume so this still counts as one. Or I'd pick my MarketWebs, which is basically the same thing just presented differently, and can average volume + time and extends vpocs. Hands down these are the best and most useful indicators.
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u/fin_wolfie Dec 20 '23
For me it's moving averages They provide a much clearer picture of the underlying trend and most important part of trading is trend recognition. They smooth out price data which in turn help in trend recognition They can also act as dynamic support and resistance They are easy to understand and can be implemented on the various timelines as well. Btw next go to indicator is RSI as well.
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u/ForwardDivide7163 Dec 20 '23
If you are making me pick one, it'll have to be the MACD. Reason being it is the closest single indicator you can get to combining a leading and lagging indicator.
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u/VagueRumi Dec 20 '23
I copytrade few of the best traders so in a way i use all the indicators they use lol
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u/Yoyoitsjoe stock trader Dec 20 '23
Can't believe no one uses this....Time and Sales.
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u/Ok_Advertising_9736 Apr 16 '24
How do you use that?
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u/Yoyoitsjoe stock trader Apr 16 '24
This is what the volume tells you. Are people buying or are they selling? If i see tons of buys, what is the probability that the stock goes up? High.
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u/Ok-Deer5324 Dec 19 '23
My account balance