Have you ever wondered why indicators are always inconsistent? Most of the indicators didn’t even give you 50% accuracy. Then why people are using indicators? Is it ok to use indicators in intraday trading? Do you know the reason why indicators are giving you the inaccurate signals? In this article, I will clarify all the doubts about indicators.
Technical analysis is the most essential part in intraday trading. The technical indicators are created by the developers with the help of historical data, price actions, support and resistance point etc,. These indicators will be give you the buying or selling signals. Some popular indicators are RSI, Bollinger bands, VWAP etc,.
The main motive of creating such indicators is to give accurate signals to the users so that users will trade effectively and make profits.
But in reality you will not earn money easily just by following a simple software and its signals. But why these signals are not working on the long term? let’s discuss the reasons one by one
Retail traders one of the important reasons why the indicators are not working everyday. This is because the actual number of traders are trading in a particular stock will change everyday, every hour or even every minute.
For example if 100,000 traders are trading in amazon stock on March 1st 2024, the same number of traders will not trade on March 2nd 2024. The number of traders may increase or decrease.
As I said earlier, the indicators are developed based on historical data. So if the number of traders are being changed everyday, the indicators will not have a capacity to give you accurate signals all the time.
Now let’s assume the the number of traders at Amazon stock on March 1st and March 2nd are almost same but still the indicators will not give you the proper signals. Because even if the number of traders are same, the traded quantity will not be the same in both days.
If there was a difference in traded volume, there will be a difference in total traded value and these difference will be in 6 to 7 figures.
So the main problem is everyday the number of traders and traded volume will get change in all the stocks. Due to this unpredictable nature, the indicators simply won’t work for the long term
We have already discussed in my other article that institutional traders are always have the upper hand in Intraday trading. Operators usually trades with more than one million dollars and they have a capacity to trade large amount of volume in a very short period of time.
Once operators are started to trade on a stock, none on the indicators will work as the stock was totally controlled by the operators for a period of time.
Operators may trade 2-3 hours in a stock depending on the market. At that particular time, indicators will not work properly.
If there was any inportant geopolitical events happened, It will impact the share market. Depends on the news, the market will move either bullish or bearish.
If the market movement was influenced by any news, events or geopolitical events, indicators will not as investors aggressively buy or sell the stock whenever they listen to any important news.
These are the main four reason why the indicators are not giving you the proper signals. You might earn some money in the past with the help of indicators. But the main problem about indicators is it will not work properly for the long term.
In other words, using technical indicators in intraday trading is another form of gambling as it requires luck to get profit.
Now we know, indicators will not work for the long term in intraday trading. But I will tell you some basic indicators that actually makes sense and it will help you to make slightly better decisions in trading.
Some brokers may not give you volume data in their chart so it is always recommended to use volume indicators. Since the intraday trading was highly depended on the operators, knowing how much volume traded on each 5 minutes candle is the most important data you much have.
To activate this, go to indicators, type volume and select volume indicator.
Moving average is one of the indicators which will actually make sense while trading. Moving average will not work on intraday trading. It is recommended for the traders who are doing swing and positional trading.
Moving averages are highly useful for swing traders and positional traders to predict the slightly better entry point. Even though, it will not give you the correct entry points all the time, you should always consider moving average indicator while doing swing or positional trading.
In general, you should activate two moving averages. One is for 20 SMA and another one for 50 SMA. Alternatively, you can also use EMA depending on the stock.
Fibonacci retracement is exactly not an indicator. It is one of the tool which is available in the chart. Fibonacci will not be useful for intraday trading. Similar to the moving average, fibonacci will be useful for swing and positional trading.
The main purpose of using Fibonacci retracement is to predict the correct entry point if you are unable to predict entry point in moving average.
If the indicators are not working properly and the market is always unpredictable, you may have a doubt how you will make money in intraday trading?
The answer is simple. More than 95% of traders are losing money in intraday trading and only the institutional traders are making money in day trading. If you want to make consistent money in intraday trading, you must practice to follow the operators.
To do this, you need all the stock data in excel sheet and then try to follow operators.
Subscribe to our news letter above and support us
Location : Chennai, Tamil Nadu India
Email id : help@thefundamentaltimes.com
Thank you for visiting our website