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February 27, 2017, 04:21:38 PM |
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I'm a technical trader, so when I see an article on Bitcoin with some analysis, I pay attention.
I agree with the longer-term view, but not so much with the shorter-term reasons.
Technical indicators are interesting, but a large array of them are useless. How can you tell?
1. ) If it uses any kind of moving average (backward sampling/smoothing) it isn't forward-looking, its backward-looking.
2.) If the indicator plot looks like you took price action, got a simple average and then normalized it within a range of 0 - 100 (or something similar) its garbage. Trading off of an indicator that is simply price rescaled isn't going to do you any favors.
3.) If an indicator gets "pegged" at one extreme or another on its scale, its fundamental premise is flawed. "Overbought/Oversold" just means they aren't accounting for how prices change. It means that the basic assumptions behind that indicator are insufficient. (I can't tell you how many times I've seen RSI/Stochastic get pegged at "Overbought" during a strong rally that would be suicide to short into.)
This throws out a bunch of indicators people like looking at, so I understand if you're mad about that right now. But its the truth. RSI/Stochastic/EMA/SMA are all crap.
Have I made my own that don't subscribe to any of the above three rules? -- Yes.
Is it worth the effort? -- Yes.
Should you? -- Absolutely. Stop using "canned" indicators that someone else threw together in the 1970's and start looking at price action in a new way.
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