Technical Indicators

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Behold the turtle - he never makes progress until he sticks his neck out. James Bryant Conant

We are repeatedly asked: Which is better: MACD or Bollinger Bands? Which is more profitable: ADX or Williams %R?

And we repeatedly answer: None of them. Technical indicators are simply small components of an overall trading system and not systems in and of themselves. They are like a couple of tools in a tool kit, not the kit itself. A technical indicator accounts for typically 10% of the overall trading success of a trend following system. Comments such as: I tried Indicator X and found it was worthless or I tried Indicator Y and found it useful, make no sense. These statements imply that an indicator is the actual trading system. Nothing could be farther from the truth.

Many popular financial web sites (i.e. CBS MarketWatch, etc.) and many trading books have popularized the idea of technical indicators as Holy Grails. Keep in mind, when you hear the hype about indicators, that money management actually makes up the bulk of a winning trading system.

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