What Technical Indicators Are Best for Day Trading?

When it comes to day trading, I really only use three indicators. I don’t think you need to use a bunch of technical indicators.

I’ll share which ones I use. First, a word of caution and how you can tell if using an indicator is helpful.

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The Big Picture

One thing I always caution with technical indicators is that it’s easy to add them to a chart, but that doesn’t make ‘em useful. Make sure that you know whether it’s making a difference.

A lot of times people add all these indicators. They got the MACD, RSI, Bollinger Bands, MA(9) red-to-green (previous day’s close or PDC), VWAP, Pivot Points. The chart starts to look like bad modern art…

That’s only six or seven indicators. Imagine what the chart would look like if you kept adding more. Some people keep stacking them until you can’t even figure out the basics.

Now, before anyone tries to say “Tim Bohen says don’t use this technical indicator”…

I’m not telling you to avoid any technical indicator. But in my experience, you can use too many.

I fell for that trap. I had 50 indicators. There was a time when I said “hey, what’s that pink line?” I couldn’t remember what it was and I had NO idea if it was helping me.

The good news is that there’s a solution to finding what indicators work best for you…

Track Your Data

Make sure you’re tracking your data. Then, use that data to determine if using a specific indicator makes a difference.

Here’s what I found for my trading…

Simple is better.

For me, the support and resistance lines (I use Oracle S&R), VWAP, and red-to-green (PDC) are good enough.

Now, you can see on the chart above that StocksToTrade includes a bunch of indicators. Again, I’m not telling you what to use (or not).

Test Using New Indicators One At a Time

If you’re going to add an indicator, add one at a time. Give yourself time and trades to see if it makes a difference. If it doesn’t, move on.

For example, someone asked me the other day if I ever use moving VWAP or anchored VWAP. I do not use either one.

From a day trade perspective, VWAP is all I need. Anchored VWAP is more of a multi-day indicator.

Now, I do have a copy of “Maximum Trading Gains With Anchored VWAP” by Brian Shannon.

It’s on the “to be read” pile. I’ll get around to reading it, eventually. Does that mean I’ll start using anchored VWAP for swing trades? Not necessarily. If I decide to test it, I’ll track my data. Then, if it makes a difference, I’ll use it.

But just adding technical indicators for no good reason? I escaped that trap years ago.

My Take

None of this is either bashing or endorsing any given technical indicator. That said, I’m a long time advocate of “Keep It Simple, Stupid” thinking. I believe you don’t need to use too many indicators, especially for day trading.

For an overview on technical indicators, I suggest my Complete Guide to Technical Indicators.

As always, one of the best books I’ve ever read on the subject is Brian Shannon’s other book “Technical Analysis Using Multiple Timeframes.”

Watchlist

Agape ATP Corporation (NASDAQ: ATPC) was on my low float gappers list yesterday.

The stock moved after-hours on Wednesday (July 15) after Jane Street Capital and one of its subsidiaries filed a 13G announcing it crossed the 5% beneficial ownership threshold.

ATPC is a many times former runner and very day tradeable stock. As always, trade the patterns.

On My Radar

• The mythical General Ludd rises again, and once again his followers are wrong
• U.S based Thinking Machines Lab dropped Inkling on Wednesday. Here we gooooo!
• This really is the GOLDEN AGE: High-T Department of War