Indicators don't work because they lag behind the price and other trading myths

That indicators don't work because they lag the price is one of the most idiotic, pernicious, and longstanding trading myths I have come across in my trading career of about 20 years as of now, with the last 12 years spent day trading e-mini futures. I blame trading forums for propagating this and many other trading myths of this sort as well.

It is probably there, on some trading forum, that I first encountered it years ago, spouted by one of those pseudo-experts who like to measure their trading expertise with the number of posts on a trading forum, and the most deranged of them swing from one forum to another like a monkey swinging from one tree onto another. At least monkeys don't propagate myths. And many are smarter than most trading pseudo-experts. Have you ever seen a monkey on a trading forum? Well, that certainly attests to how smart they are.

Saying that trading indicators don't work because they lag behind the price is like saying that aspirin does not work because it has side effects!

Indicators can be useful, and how useful they are depends on how well you can eliminate their side effects. You can minimize these side effects quite well, if you think a bit out of the box. In other words, some creativity may be in order here. Creativity and novel ideas is what gives you an edge in this game, and questioning myths of this kind is a good way to start seeking this edge.

I like to say that the trading indicator is only as good as the trader that uses it, which is also a very politically correct way of saying that stupid people make stupid traders.

If you spent some time actually studying how indicators work and how to put them to the best possible use instead of jumping from one "holy grail" to another, you would be a power trader now. Sadly, that is not what many (I suspect most) wannabe traders do.

And it gets even worse. Once they have failed to identify the best way to use indicators, they declare themselves enlightened and move to trading using only the price action. Well, maybe not right away. After replenishing their brokerage account first.

Yes, you can trade using indicators, just as you can trade using the price action. The truly astute and creative traders use both. And why not? Every little bit may help, but only if you know how to use them. Which is really the name of the game: knowing how put things to work instead of dismissing them as not useful because some self-proclaimed guru on a trading forum for perennial losers said so.

The moment you stop paying attention to what every self-proclaimed trading guru (or any other one, for that matter) says is the moment you reclaim your sanity and the courage to trust your own intellect. I urge you to do it now.

This and other myths of this sort that trading forums like to propagate will be the subject of discussions on the forum I am about to launch. I want this forum to serve as a place to question things, a place to promote critical and creative thinking. It's not that hard to be a creative thinker. And it gets much easier the very moment you start thinking.

Posted on October 7th, 2014.