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Day Trading Indicators (For Beginners) | Amazing Adviser

 

Are you a beginner? Do you want to know about best day trading indicators? Are you confused which are the best? Check out this article.

 

day trading indicators for beginners

One of the most common asked questions on  my channel, besides asking if I'm single or  not, is what indicators do I use in day trading,  and which ones are the best, that's going to make  you easy millions of dollars.  

And as someone who's been day trading for good  six years now, I’ve certainly gone through  tons of indicators from MACD, RSI, paraoblic  SAR, moving averages, VWAP, ichimoku clouds,  bollinger bands, and smashing the like button,  the list just goes on and on. 


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I personally do not suggest relying on indicators,  but I get it, if you are a beginner trader  this is usually where people like to do to  get started with finding the perfect entries  and exits. 

I traded with many indicators myself  when i was first learning to day trade as  well. 

While I no longer use any indicators besides  VWAP which I will go over why in a little  bit, I still know a few things about all these  various indicators and the best ways to use  them. 

And when I was using indicators to trade,  the best ways I found is to use them in pairs. 

Meaning that no trading indicator is really  that useful on its own, but they become very  powerful when you put lets say RSI and MACD  together, and vwap and moving average as a  a pair.  

So I will be talking about  the most popular indicators out there and  how to best use them for day trading beginners,  as well as what I think are the problems with  relying on these indicators. 

Once again, there  are no right way, or wrong way to use these  indicators, its all up to your personal trading  style. So let's talk about best day trading indicators.  

So first and foremost, the indicator pair  that so many day traders love to use is the  MACD and RSI. MACD stands for moving average  convergence divergence.

This is a trend indicator,  meaning that it tells you when there is a  reversal of trend coming along, whether a  stock is starting to breakout to the upside,  or selling off to the downside. 

And how to read this MACD indicator? By default  this is what the settings look like in think or swim,  and you can do the same in any of your broker  platforms. 

Again, you want to use the default  settings of 12,26,9, because the whole point  of using these trading indicators is that  you see what the majority of the crowd sees  right? This is a trend indicator, you want  to see when the buying or selling money flow  changes. 

So basically when the two lines, the blue  being the fast line, and the white being the  slow line, crosses each other, that's where  these stock starts to change trend, and the  histogram, this pretty looking green and red  graph down here, starts to disappear.  

You can see when the blue line crosses over  the white line and the histogram turns red  to green, this stock SPCE started trending  up higher. 


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And when the blue line crosses  beneath the white line, and histogram becomes  red, the stock is slowly selling off to the  downside. 

But wait, remember I said this works best  when you pair the MACD indicator up with the  RSI. 

RSI, relative strength index, is a momentum  indicator that tells you when a stock is overbought,  which is when the line crosses above 70-90,  meaning there is too much buying to the upside  and we could potentially be exhausting the  buyers and we’re near the top;  or it tells you when a stock is oversold,  when the line dips below 30, meaning that  there is too much emotional selling and we  are near a bottom level, the stock could start  to bounce.

Again, you want to use the default  settings with RSI in think or swim.  The whole purpose of using RSI indicator is  to pick the top and bottom of a stock. Which  sounds kind of similar to trend reversal with  the MACD indicator.  

So that's why people like to pair these two  indicators up in day trading. Because just  by itself, MACD is a lagging indicator.

Meaning  that it takes a while for the fast line and  the slow line to decisively converge. Which  is fine for swing trading in general, but  for day trading where precision in entry and  every single second counts, its not exactly  ideal.  RSI ,on the other hand, i find it to be early  just by itself.

As you can see from this example  here, RSI line crosses above this 70 and starts  turning red, but the stock still keeps on  going up higher for the next 10 minutes. 

And  its the same way the other way around as well  to the downside. 

And that's why it’s a good idea to combine  your RSI indicator with your MACD. so when  you see the lines on your MACD start to cross  and the RSI is still not hitting 70 yet, you  could probably start looking for an entry.  

When you see RSI starts turning red above  the 70 zone, don't worry, check your MACD indicator  and see if the fast line and slow line are  still far from crossing. If that's the case,  they stay in the trade.  

But the oversold RSI is just there to remind  you that a reversal could potentially happen  soon. Same thing with the sell off here, yes  the RSI indicates that the stock is oversold  you can start looking for entries to bounce  the stock back, but the MACD hasn’t confirmed  a crossing yet to indicate the upside.

So  you wait for both of these indicators to align  before taking an entry.  

So as you can by using this RSI and MACD indicator  pair does, yes it indicates to you where there  is a potential reversal coming soon, but still  requires you to be patient and wait for confirmation,  instead of jumping in right away when you  see there is a potential top to enter short,  or a bottom to enter long.  

I personally found this indicator pair to  work better when trading mid cap and large  caps.

Not so much for trading volatile penny  stocks. Is this RSI and MACD indicator going  to give you 100% win rate all the time? Absolutely  not, nothing is 100%gauratneeed in day trading.  the only to do so is if u remember to hit  the like button at the bottom of this video. 

I find the better indicator pair to use for  trading low float penny stocks, is vwap and  9 ema pair. Vwap stands for volume weighted  average price. It indicates relative strength  or weakness of a stock. So for example, if  a stock is trading above vwap, that means  its bullish, and the majority of the volume  are the buyers.  

And vice versa, if a stock is breaking beneath  vwap, that means its weak and the sellers  have control of the stock. That is simply  just the most general way people use vwap. 

Its a guide to indicate whether the stock  is a bullish short term or bearish short term.  

And if a stock is just trading around vwap,  holding above it for a little but breaking  down beneath really quickly only to come back  up again, that means generally the stock is  choppy. And the direction is undecided, or  that could indicate a vwap trap, which is  something you hear me mention a lot in my  trading recap videos.  

Because vwap is such an extremely generally  strength indicator, how everyone uses it is  slightly different. And how hard the stock  pulls away above or beneath it could indicate  a potential extension. We’ll talk more about  vwap trap and vwap extension later on. 

So you can add vwap here in think or swim studies  settings. Again, I always just use the default  settings, I never try to change any of the  numbers up there.

You can change the colors  if you want in this vwap tab. Very important  though make sure to turn off upper band and  lower band. And there you have your default  vwap.  

At the moment, I just use vwap by itself,  but I have found that combining the vwap indicator  with the 9 ema to be quite useful.

EMA’s  stand for exponential moving average which  tracks the overall trend of a stock over a  designated period of time.  I get this question a lot, what's the difference  between EMA’s and SMA’s, simple moving  avg. 

Compared to SMA’s, the EMA’s put  more weight on the current price fluctuations.  So this indicator react faster to current  price changes, so its more ideal for active  intraday trading.  

On the other hand SMA’s updates slower because  it calculates the overall period weighted  equally. So SMA’s are better for swing trading  and longer term trading generally. 

Now what this 9ema and VWAP pair does is that  it indicates the start of a very strong break  out, generally speaking. Again you can set  this up by going to studies, edit studies  in think or swim and look for moving average  exponential.  

You can set your length here to 9 if you are  using the 9 ema, some common ones many people  love to use are the 9, 13, and 15. And honestly,  the difference really doesn't matter as you  can see here.  

But again, this is my own opinion, as a trader  who do not rely on any indicators anymore.  There are many people who swear by it I'm sure.  

So using the VWAP and 9EMA pair is really  simple. Since vwap shows you the strength  like we talked about earlier, and the ema  shows the trend. If you put them together  that should indicate to you when the strongest  trend change is going to occur, right?

In  the perfect thats what should happen.  So in this instance, you can see when the  9ema the white line crosses over vwap, that's  where a strong breakout occurs, and vice versa  when the white ema crosses below vwap, that  shows a strong sell off.  

The further the white 9ema pulls away from  vwap, that indicates the stronger the breakout  is to the upside. And vice versa on the downside.  

So that tells you do not fight the trend or  the strength, just buy the dips if the stock  is strong, or short the pops if the stock  is weak.  

Now that you’ve seen the two pairs of indicators  that I liked using when I was starting out  years ago, you must be wondering, so why did  you stop using them, or any indicators at  all? 

Well here is my answer, using indicator, in  my opinion, is a distraction from observing  the real price action of the candles. All  these indicators look picture perfect in hindsight  after the move has finished. Its just like  memorizing patterns. 

These things do not provide  you the little nuance regarding who is trapped  in pain and where the momentum is going.  In the moment, in real time, the way the candles  move and how hard it rejects a resistance  or bounce off a support, that's real price  action. 

And that's the only indicator really  in real time, that's not lagging and that  can really give you the best anticipations  and confirmations in day trading.  

Don't get me wrong, using indicator pairs like  I've talked about here is a good way to get  started, for beginner traders to start seeing  the trend changes and where the overall condition  might be extended to the upside or downside. 

But i do encourage you, once you start seeing  some progress trading that way, shift your  attention to observing the candles and price  action in real time. 

You will find doing so  to give you way better entries and better  read on the stock.  Like I said, the only indicator I leave on  my chart nowadays is just vwap, and volume. 

So if you want to see a video dedicated to  how I use vwap in day trading, and how to  spot little long traps and short traps, let  me know in the comments section below. 

And  also, let me know what your favorite indicators  are and how u use them, I'm always interested  to hearing what other traders use . 

So if you want to see best day trading indicators in video then you can check here.



Thank You

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