Classification/Categorization of Indicators

tomsk

Well-known member
VIP
As many of us know, Mobius is a well respected coder, developer, programmer, mentor, etc in the ThinkScript community

Several years ago he shared his thoughts on indicators. Since this thread is all about indicators, I thought I would share his views with you.
I captured these comments he posted several years ago in the ThinkScript Lounge which resonated with me as some really good points to consider.

Mobius©: No indicator is better than a trader who can read price well. Indicators are for computer trading and traders that need something to lean on for risk decisions. The uniform method in categorizing indicators is to divide them into 5 types: trend, momentum, volatility, volume or pivot. Those are the categories used in the development of CSA (combined signal approach) programs

Simple category descriptions

Momentum:
If price is involved with no averaging at the first derivative then it's most likely a momentum indicator such as Stochastic or RSI.
Pivot: If price points alone are plotted it's a pivot study.
Volume: If volume and its derivatives are plotted it's a volume study
Trend: if price is used for any sort of single moving average that's trend.
Volatility: Any study that incorporates a Black Scholes Pricing Model or Binomial pricing model.

I discovered a while back that most can have the best indicator in the world and not know it because they never spend the time with it to know when and how to use it. So I entertain myself writing them and don't worry about trying to educate folks on how to use them.
 
Last edited by a moderator:

skynetgen

Well-known member
Basically that is the same categorization I arrived to by studying and backtesting everything I could lay my hands on. Except what I consider "volatility" is indicator linked to average true range and deviations from it.

No indicator or combination of them represents a complete trading system. What indicators are indispensable for though is back testing,scanning and algo trading. However indicators needs to be used just as signals to feed into the ruleset . By themselves they cannot be a sole basis for buy/sell decision

And another thing - it can be be the best set of rules and best set of indicators. But they must be applied in correct market condition to correct universe of stocks. - Figuring the universe is a very big and overlooked part of trading
 

tomsk

Well-known member
VIP
Basically that is the same categorization I arrived to by studying and backtesting everything I could lay my hands on. Except what I consider "volatility" is indicator linked to average true range and deviations from it.

No indicator or combination of them represents a complete trading system. What indicators are indispensable for though is back testing,scanning and algo trading. However indicators needs to be used just as signals to feed into the ruleset . By themselves they cannot be a sole basis for buy/sell decision

And another thing - it can be be the best set of rules and best set of indicators. But they must be applied in correct market condition to correct universe of stocks. - Figuring the universe is a very big and overlooked part of trading

Very well articulated @skynetgen I couldn't concur more!
 

Similar threads

The Market Trading Game Changer

Join 2,500+ subscribers inside the useThinkScript VIP Membership Club
  • Exclusive indicators
  • Proven strategies & setups
  • Private Discord community
  • ‘Buy The Dip’ signal alerts
  • Exclusive members-only content
  • Add-ons and resources
  • 1 full year of unlimited support

Frequently Asked Questions

What is useThinkScript?

useThinkScript is the #1 community of stock market investors using indicators and other tools to power their trading strategies. Traders of all skill levels use our forums to learn about scripting and indicators, help each other, and discover new ways to gain an edge in the markets.

How do I get started?

We get it. Our forum can be intimidating, if not overwhelming. With thousands of topics, tens of thousands of posts, our community has created an incredibly deep knowledge base for stock traders. No one can ever exhaust every resource provided on our site.

If you are new, or just looking for guidance, here are some helpful links to get you started.

What are the benefits of VIP Membership?
VIP members get exclusive access to these proven and tested premium indicators: Buy the Dip, Advanced Market Moves 2.0, Take Profit, and Volatility Trading Range. In addition, VIP members get access to over 50 VIP-only custom indicators, add-ons, and strategies, private VIP-only forums, private Discord channel to discuss trades and strategies in real-time, customer support, trade alerts, and much more. Learn all about VIP membership here.
How can I access the premium indicators?
To access the premium indicators, which are plug and play ready, sign up for VIP membership here.
Top