The Beauty Of Technical Indicators - An Interview
An interview on the subject of technical indicators for trading.
Tom began by welcoming Stuart to the Money Show video network. He then proceeded, 'I know you give presentations around the world on the importance of having a trading plan. But you are also a technical analyst so I'd be interested today in sort of what kind of technical methods you use. You probably looked at quite a few and maybe give your pros and cons things you like about certain methods and things you don't like about other methods.'
Stuart replied that first and foremost he is a technical analyst and he loves looking at charts. 'I think the big advantage of looking at charts is that it is the price which ultimately determines whether you make a profit or not, not other things we think about the company or instrument.
One of the things when I started out I was very fascinated by technical indicators and we could list a hundred here. I, like many others, was fascinated with them. I saw them on these charts, I saw the lines going everywhere and there was something mystical about them, something magical and they were going to give me some power if I understood what they did. At some point along my trading I realized these are not providing me much advantage, a significant edge so I decided to go back to the basics and keep it simple.
I love looking at charts. I look for a lot of reversal signals in my short term trading when I trade contracts for different CFDs. I look for short term reversals. My stock trading for my retirement fund is very much based on medium term trends.
I do just use moving averages for identifying medium term trends but apart from some simple peaks and troughs analysis you know higher peaks, higher troughs I really do try and keep it simple. Because simple is easy to implement, it is easy to follow and it generally works.'
Mark adds: 'And you think that too many people probably get wrapped up into the fifteen technical studies and they get information overload which can probably decrease their confidence in their methodology and make them almost inactive.'
Stuart replies: 'Yes I did and I think a lot of people do. When we start trading we think trading is easy and then we realize it's not so easy. So if it's not easy and it's difficult to do, clearly a more complex and complicated approach is what is required to make this work. So we see all these indicators, we try to complicate things.
Trading definitely doesn't need to be over complicated it doesn't need to be complex. The principles, the rules that have been time tested are very simple concepts and technical analysis and keeping it simple just looking at price, works. Yes people can get carried away with technical indicators. I've moved beyond that. A lot of people do move through and say, you know what, they really don't provide me much. Just look at the price. Price is probably the best indicator of what is happening.
by: Jimmy Cox
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