I was a pretty active kid, and drank Gatorade by the gallon. There was something special about the taste of this magical elixir, scientifically engineered not for any normal thirst, but for that serious, Deep Down Body thirst. Everyone had their favorite flavor, and you had a one in three chance of guessing anyone’s preferred thirst quencher. It was either Red, Orange, or the original Radio-Active yellow.
Today is hot. Hot enough to make me thirsty, and I’m talking about that Deep Down Body Thirst that could only be quenched by an Orange Gatorade. As I walked into the convenience store, I thought “How convenient! They have a whole cooler section of Orange, that’s awesome”. Thoughts of my kids complaining about never being able to find their preferred flavors were fleeting. After all, there’s orange, red is over there, and look there’s a bunch of RA-Yellow right in the middle.
I don’t lose a second when I get back into the car. I can’t get the cap off fast enough. I mean, it’s really hot. I steady myself though, because I know that watery, bland, tastes-nothing-like-an-actual-orange goodness is milliseconds from my lips…
Well, it took copious swishing of scalding hot coffee to burn the foulness out of my mouth after that first huge swig. These days, it seems you must specify exactly which Orange Gatorade you want, because there’s approximately 6,463 (ish) flavors of Gatorade, which are orange in color.
I’m not sure what it was supposed to taste like, but I think they were going for Cantaloupe. Sure, I’ll take responsibility for not reading the fine print where it reads “Fierce Melon”, but who in their right mind thought this was a good idea? Oh, and if you’re buying Gatorade for your kids, and they want grape, it’s not purple any more. Apparently “Grape” has been replaced with “Fierce Grape”, which is blue. Unless they’re looking for “Frost Riptide Rush”, which you only thought was grape because of the purple color. If the new blue “Fierce” grape still isn’t the right grape, they might be wanting “All Stars Grape”, which is also blue. And don’t worry if you’re still coming home with the wrong flavor… there’s only one more that might be the “grape” you’re looking for, and that’s “Berry Rain”. While it’s actually purple, it’s more of a translucent, “laboratory-grade” purple than anything resembling a piece of fruit.
Now that I’ve spent a good deal of my first post ranting about Gatorade’s triumphant squaring of Baskin-Robins flavor count, I’ll get to my point. My quest for quenching brought to mind a recent conversation I had with my good friend Shonn Campbell (@planteautrader) at our favorite cigar lounge. Indicators. Like Gatorade, you better be sure you know what flavor that squiggly orange line is, because it may or may not be the the orange you think it is.
Traders use indicators for everything. We use indicators to get into a trade. We use them to get out. We use them to know when to move our stops and where to take profit. If we could, we’d have an indicator to tell us what to have for dinner. New traders especially, fall victim to deceptive flavoring and color scheming of indicators. Don’t get me wrong, I’m not one of those “naked chart” guys, and I wouldn’t know what to do with “table” mode in my platform. What I do know however, is that there’s not a single indicator that gives buy or sell signals. It’s up to the trader to interpret the seemingly arbitrary information provided by the indicator, and chances are most people can’t even determine why that particular information is relevant to their trades, let alone figure out whether the Bollinger Bands with a -30 shift that are applied to the Stochastics on the RSI of the MACD are saying buy or sell. To top it off, while we spend all this time looking at, and trying to interpret 16 indicators on our chart, we completely lose track of what the actual price of the instrument we’re trading is doing. Odd, considering the only thing that determines whether we accomplish our objective or not is a change in price.
Speaking for myself, I can say with absolute certainty, that I have lost money I didn’t need to lose, while searching for that magical indicator that was going to earn me 10,000% by next Friday. I never did find that one, and it’s not because I didn’t look. Now, if you’re an experienced trader, consistently taking profit from the market, then you probably know what there is to know about the indicators on your charts, if you even have any. However if you’re a new trader, learning the ropes, you’re probably thinking that an indicator is going to give you an edge, and eight edges must be better than one right? Wrong.
So if you’re having trouble with consistency, do a quick review of the indicators on your charts. Is the information they provide relevant to your strategy (you’ve got a strategy right)? Are multiple indicators giving you redundant data with mixed signals? Are you buying tops and selling bottoms because RSI and Stochastics told you to? If you’re not happy with your trading, you could very well be blocking your own path to success with that huge pile of indicators. Take a deep breath, clear your charts, find some good support and resistance levels on a time-frame not measured in seconds, and try trading price for a week or two. The results may just surprise you.