Traders are constantly searching for the indicator that will make them rich, but trader Rob Hoffman warns that indicators work differently for every trader and mustn't be used as a crutch.
Traders always seem to be looking for the next hot indicator or the indicator that’s going to make them millions of dollars and be able to use that forever and ever on any kind of market, but is that the reality?
Our guest today is Rob Hoffman; he’s here to talk about that. Rob, should I rely or go out and try to find the best indicator to use and continually use that? What’s the best way to deal with so many that are out there?
You know Tim, I went through that for years, looking for the magic bullet, the secret, the “Holy Grail.” While I found a lot of indicators that seemed to work a lot of the time, what I really found in the end is that it’s not just indicators, because even if you have a great indicator, what do you do with that indicator?
When it says buy, do you go ahead and delay your buying decision? Do you go ahead and buy in front of your buying decision, so do you front-run the indicator? How do you start handling it emotionally when the signal is about to fire off or does fire off?
Even if you have a great indicator, what I find often in the real world is what works really well for trader number one doesn’t necessarily work well for trader number two.
A lot of that is personality, personality style, and also kind of their mindset, their emotional state.
What I believe is…I’m a firm believer that the “Holy Grail,” in many ways, is within a trader, their mindset.
I often talk about different mindsets that I believe to be adverse for most traders. What happens is—and I had recently a real life example of another reason not to go ahead and rely strictly on indicators, but focus on price action, support/resistance, and mindset as well—I recently had a situation where a permissioning server that I was trading through went ahead and went down, so all the indicators that I had that were permissioned on that server all went down, so effectively I had support/resistance levels, price action, and a volume indicator, basically, a volume indication.
So I was back to the basics. No fancy indicators, no custom indicators, no proprietary “Holy Grails,” just Rob Hoffman’s support/resistance and price action. That trade worked out very well for me.
The point is, though, regardless of how it worked out, I had to get back to the basics, and if I was really only focused on indicator trading, I would have been paralyzed. What do I do, my indicators aren’t there, I guess I’m going to have to shut down the computer for the day?
Also, indicators are very well known or giving false signals. Even the best indicators will occasionally give you a false signal.
How do you, or how in tune are you with the market to tell you at a particular time, you know, the indicator says buy or sell, but something just doesn’t seem right here. I’m not feeling it in the price action; something’s off, something’s not right. I think I’m going to abstain from taking this particular trade, so still being in tune with price action, volumes, support/resistance, I think, are really important.
You want to be able to trade whether or not you have access to a specific tool. Because in the end at some point you’re going to have just price to watch and maybe volume and the support and resistance levels, so you don’t want to use it as a crutch, I guess.
Exactly, I’m very firm about that, I don’t want to use it as a crutch. It’s a support decision tool when I have it, but in the end, there’s more than life in this search for the “Holy Grail” or the Holy indicator, that’s right.
