Trading futures without indicators
The Volume Indicator VOL displays the number of financial instruments traded during a specific period of time. Volume spikes signal surges in buy or sell activity and often act as a prelude to potential market reversals or large price action moves. The chart below of the Nasdaq futures contract NQ during October — August of is an example using the VOL Indicator to spot a sudden increase in buying or selling activity:.
The Momentum Oscillator can be used by traders to show potentially overbought or oversold market conditions. Displayed below, as a second chart panel, the Momentum Oscillator represents the speed and strength of a trend over time. The greater the value above the horizontal signal line, the greater the probability is of increased price movement and vice versa.
The following chart featuring the daily Nasdaq futures contract NQ from October — August of is an example of the momentum oscillator increasing ahead of moves within the market:. As always, remember past performance is not indicative of future results and you should always trade within your risk tolerance levels. As an award-wining futures broker , NinjaTrader provides deep discount commissions and unmatched support. Download NinjaTrader free today and explore over free pre-built indicators!
Candlesticks or bar charts are tools to visualize price information on your charts. Indicators take the same price information and apply a formula to it. This will become more apparent in the next points. An indicator takes past price action the amount is defined by the indicator setting and then visualizes the result after applying a formula to it.
Thus, what your indicator shows you is a result of past price action. To overcome the lagging component, you would have to set your indicator to a shorter time setting or only use a handful of past candlesticks to make your analysis. However, the analysis becomes less and less significant the fewer information you include.
Trading candlesticks are not as easy as it sounds and lots of components often get overlooked, such as the size of candlesticks, how they compare to previous price action and the component of momentum and volatility in wicks and bodies. This is an extension of the previous point. The old argument that indicator charts are messy does not hold up.
When it comes to indicator trading, traders usually pick one oscillator to analyze momentum and another indicator for chart studies; a good combination is the Stochastic which is a momentum based oscillator and the Bollinger Bands which is a volatility and momentum based chart study tool with a moving average.
Indicators can provide guidance and help traders make objective trading decisions. There is very little room for subjectivity when it comes to analyzing an indicator. On the other hand, price action traders who look at blank charts can easily feel lost, lacking the clear reference points or tools to help them make trading decisions, resulting in acting emotionally or impulsively.
As always, such an argument does not hold up when we take a closer look.