Redundant Indicators

The last time I counted, Schwab Think or Swim® had 384 indicators and a slew of drawing and other tools, all of which have been designed to make you a better, more successful trader.

Then, there are stock symbols such as the CBOE VIX index, an option-derived measure of expected S&P 500 volatility that is known as Wall Street’s fear gauge. It is also commonly known as the volatility indicator. This index is a handy guide that tells us the degree of angst currently in the market. The higher the VIX, the more volatile the market is, and hence, the more likely the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) tends to drop in price.

The issue I have with the VIX, and other similar indicators, is that they are contemporaneous rather than a forward-looking signal. In other words, they perform in sync with the market and tell me absolutely nothing. As the VIX climbs, prices drop. As the VIX drops, SPY rises. So what? I have not a shred of new information I can use to determine whether I should buy, sell or hold a position.

If you superimpose many of the indicators on your charts, you will see similar patterns — some matched pixel-to-pixel, just using different names. Imagine the newbie trader believing that the more indicators there are on a chart, the better trader he/she will be. Not so!

I find the simpler, the better. Stocks move up and they move down. There is no other way they can go. If you can establish just a small handful of indicators that you can effectively use, you can make better, faster decisions. In the case of charting, less is more.

I once had a client, Mike from New Jersey, who became very good at trading using our methodology. Then one day, he called me out of the blue to complain my system was no longer working. Upon further questioning, it turned out he had a spate of other indicators installed as well, provided mostly by well-meaning friends. He was saddled with analysis paralysis, waiting for all his indicators to set up properly before making a purchase. The problem was when his indicators all gave him the green light, that trade was over. “Mike, you’re getting in at the end of the trend! Dump all those extraneous indicators in the East River and get back to what I taught you!” Once he cleared off his charts, he returned to profitability.

Keep it simple and use only a select few but effective indicators. Make a decision and execute accordingly. You may be surprised that your counterparts who are analyzing to death are not actually trading. Meanwhile, you’re in and out repeatedly, making money.

My cohort, Ahren Stephens, delves into deeper, more complex technicals using a host of other indicators. And this is the beauty of what we do: when Ahren identifies an upcoming, high probability trade on calls, and I do on a different set but simpler indicators, you may want to make that purchase. We independently assess our potential and aim to reach a consensus, substantiating our motto, “When our indicators unite, our trades ignite!” No other trading service does this.

We have you covered in our Trading Room with Ahren’s deep dive analysis, combined with my simple methodology to gain a keen understanding of where SPY will likely go during the day. Admittedly, I tend to trade more than Ahren because my straightforward system affords me more opportunities. Few but effective indicators, combined with stunning chart patterns — that’s all you really need from us. You provide some emotional control and therein lies your winning formula to make money on the market.

That said, this does not come easy as with a mere breeze through a book or video. Becoming a great trader requires extensive experience but you can cut down on the learning curve by being a part of our DayTradeSPY team. The more you engage with us, the better trader you will be. It’s just that simple. Take full advantage of our offerings. Ahren and I have a combined 40-plus years of market involvement. There is nothing we have not seen over our decades of trading options.

Our highly successful and sought after services are available to you now! Every day you wait, you lose another day of making money. Check us out now! Click here for information on the highly successful DTS Signal. Click here for the Pick of the Day, and click here for the Inner Circle. For details on the Trading Room, click here.