Best Technical Indicators

[alexchartfilter]

I'm looking for the best two or three technical indicators to use for buy/sell signals for ETFs such as IVV, VXF, EFA, and AGG. Maybe a short list for long term and a short list for short term. MACD and Full Stochastics look the most promising followed by Williams %R. Open to suggestions.

by mbehr55 on Wed Nov 21, 2007 11:59 am

[alexchartfilter]

I would include trendlines with the Full stochastics & MACD. I found the stochastics to work the best with the index's/ETF/Blue Chips. I like the Williams %R but I found it to be a better screening indicator.

I have also had to alter the parameters with the (full) stochastics to get them to fit properly. I like the 21,9,9 & 20,3,3 for the longer term swings.

Alex

[alexchartfilter]

For Full Stochastic, I was looking at 9,3,3 for short term and the default for long term. If I was looking for monthly buy/sell signals for these ERFs, what would you suggest?

by mbehr55 on Fri Nov 23, 2007 9:49 am

[alexchartfilter]

I found the 21,9,9 to be the best for the longer term swing (you may need to do a slight adjustment, but it's pretty close)

Combining the 9,3,3 with the 21,9,9 has saved me from the odd correction.

Alex

[alexchartfilter]

I did a fast comparison and the Full Stochastics 21,9,9 is a good compliment with MACD 12,26,9. What other indicators would go well with these two?

by mbehr55 on Fri Nov 23, 2007 2:29 pm

[alexchartfilter]

I agree with the MACD as a good complementary indicator to stochastics.

A must have is trendlines (on both price, volume and indicator charts). Support/resistance and Divergences/convergences are very important with this type of system. Maybe MFI or just chart the volume (under indicators in stocktools), but this tends to complicate this system.

Include some basic price patterns as well, such as head and shoulders, double tops/bottoms, hangman/hammer. Mostly just the reversal patterns.

And the basic tenents to Dow theory, that larger than average volume should proceed a new trend.

If the stock is trending with high volume these should be fine, problems occur during range bound situations which is why I add in a full stoch(9,3,3) as well with the full stoch(21,9,9). Just as a confirmation of the overall trend.

I tend to be in cash quite often as well when swing trading this way, maybe about 50% of the time depending on which stock/index I am trading. So a list of potential stocks is a good way to keep things moving.

The e-mail alerts on stocktools are super handy here when you are waiting for the next in.

Alex

[alexchartfilter]

Just to clarify my last post, by range bound I mean sideways/choppy charts. Technically the DJIA is range bound over the long term, but has an excellent trend to it.

In this case the DJIA is a perfect example of a trending chart. Here was my last look at it, it has both stochastics, the 29,9,9 and the 9,3,3 http://www.chartfilter.com/newsletter/nl50/nl50.htm

Also the previous one uses the MACD with the 21,9,9 http://www.chartfilter.com/newsletter/nl49/nl49.htm

Alex

[alexchartfilter]

Excellent example.

by mbehr55 on Sun Nov 25, 2007 6:27 am

[alexchartfilter]

In using the 9,3,3 with Full Stochastics, what would be a good buy/sell point? The 50 line or the 80/20 lines?

by mbehr55 on Sun Nov 25, 2007 6:41 am

[alexchartfilter]

I always wait for it to cross through the extreme (20/80) (first signal) and have the %K & %D cross (second signal). The %K and %D cross should line up with your trendline break on your price chart.

When it crosses back out of the extreme values, this would be considered a "late" signal.

Alex