subject: Learning Eminis and Indicators in Trading [print this page] Should You Use Indicators in Emini Trading?
Let me be succinct, so you don't misuse your time on some people who might be into either of two groups: the bloc that pronounces that indicators don't work and the bloc that pronounces that you can transact using only indicators without considering the price bars. Basically, no Emini Trading System.
The second faction is more lunatic than the first one. However, they have one thing in common: they mainly are made up of of bozos who most likely have never traded in their lives, thus have inadequate notion what works and what does not. In particular, they don't comprehend that indicators do work, except that there are occurrences when they don't function. You obviously do not have an apparent grasp on trading if you don't know something like this, which is rather basic to those who have studied these things.
Unfortunately, these days more than ever before, the World Wide Web is teeming with merchants pretending to be trade authorities adding to the puzzlement of those who are only starting trading Eminis Futures. Sometimes these pseudo-experts will even use the no indicators formula to make their system look special or particularly simple to utilize. Like in "look ma, no indicators." I recently ran into one of those guys who has taken it to a totally new level: a very hasty check of his site brings out into open that he is utilizing indicators even if he is denying it. The system uses not just one, but two indicators, rather familiar ones, at least for more sophisticated Emini Futures traders.
It's quite simple actually. It's a pretty standard definition.
The indicator is some function, mathematically speaking, of price. Moving means and different kinds of oscillators (stochastics, for instance) are proper instances of that. What the functions do is to take the price and transform it into something else. That something else every so often is not even measured in the same units as amount, meaning it does not utilize the same scale as the price outline. Different types of oscillators are an appropriate case in point of this type of instance, while moving averages are not. The price itself, if not subjected to any transformation is, obviously, not an indicator.
Yes, it is possible to have Emini Futures trading systems that truly rely on no indicators. This author designed a scheme like that for trading the s&p 500 Emini Futures years ago, seven to be more precise. The system did well back then, and continues to work well even these days. I use this personal case to establish that Emini Future trading systems can work without an indicator. However, it does not mean that systems using indicators do not work.
The reason some people tend to wrongly believe that indicators don't work has a lot, if not everything, to do with the nature of indicators. Being the offshoots of price, indicators lag behind it. As a result, the trader acting on signs from indicators is bound to be late compared to the trader who uses only the price to decide in his trading. This does not matter in occasions when instability is relatively high, but when instability is low, the trader relying on indicators will be struggling with ranges too small to allow him to make any revenue. It is thus not indicators, but volatility that prevents the traders from making money. The use of indicators will not be a major botheration if trading is restricted to incidents when instability is decent.
To those new to the world of Emini Futures, who may even not know what I am talking about, let me briefly mention what Eminis are for they are trading instruments that are relatively novel.
Emini Futures are smaller contracts of older futures contracts that have been around for a few decades. The "mini" part in their name has to do with their smaller size, which is much smaller than the older futures contracts. Emini Futures have always been traded electronically while the older futures contracts were traded on physical exchanges, allowing small, retail traders with access to the The Web to compete against traditional traders. From their offices at home or anywhere in the world, trading can be successfully done. That's what the "e" in their name stands for, namely "electronic."
