Use of charts and indicators in trading


Before dealing with the topic, please read the observation and tell me if you have come across this scenario in real life? You see an advertisement for another cryptoanalysis or trading channel, click on the link and get into a Klondike of clickbait headlines: "+250% on one trade", "Made $20,000 profit", “200% on one trade” etc. All of this is backed up by screenshots of wallets with green pluses. That’s what happens, you get lost in a mass of colorful images and lines, covered with a veil of mystery (secret stocks indicators, oscillators, patterns), and you start to believe that someone “has understood the market” and you blindly follow them.

But after a while you notice that your deposit has become “thinner”, and you start looking for other approaches to market analysis and/or other authors of channels. And you find Resonance. If you are here, it means you are in the right place and you will have a different view of the market. Let’s start with the basics.

Types of stocks charts of price

All stock market charts have two axes. The horizontal X-axis is the time value and the vertical Y-axis is the price value.

There are several ways to display price changes on a trading chart. The simplest is the tick or line stock market graphs. It is not formed by time but by trades: one trade made – a tick has been formed. But the most common is the candlestick chart in the stock market, which collects ticks in candlesticks for certain periods of time. Based on the combination of Japanese candlesticks in trading, we make suggestions for where the price can go next. And it is only recently that the cluster chart has appeared in the arsenal of traders. We don’t want to repeat ourselves, so you can learn more about each of them in the second lesson of the first level of our online university. But often it seems to many traders that “naked” charts do not give enough information about the possible future trajectory, so something more is needed. And that “something more” has been found.

Technical indicators for stocks

In the article “What’s wrong with technical analysis” you can read about what technical analysis is and why it is low efficient. Perhaps adding indicators for stocks to your trading strategy can help increase its efficiency.

Price level indicators are very popular among all types of traders, but especially among beginners. Even after studying many technical analysis courses and books, a beginner still has many questions about how to read a stock chart, how to interpret different market situations, how to draw levels, patterns, trend lines, etc. Not to mention the importance of determining the exact entry and exit point.

That’s where these indicators come to the rescue, including indicators for scalping or medium-term trading. And if you are disappointed with a particular indicator, you can always choose from hundreds of similar indicators. Combined with the exchange candlestick patterns, and drawn lines, it seems that crypto indicators are the Holy Grail that everyone is looking for. Traders seem to need a little tweaking and just the right combination of them.

Objectivity of indicators

Why is the objectivity of trading indicators questionable? First of all, each indicator works according to a specific formula.

The formula itself is a figment of the author’s imagination. It is the author who defines the values to be chosen as defaults in the formulas.

Has anyone ever asked themselves:

  • Why were these values are chosen and not others?
  • For what timeframe was, for example, this forex indicator designed?
  • At what risk does it work better?

Maybe the author invented it for himself, not to share it with anyone, or maybe on the contrary, to distribute it and make money from its sale.

The diversity of indicators, e.g. best day trading indicators, is fascinating. At the moment you can find thousands of different indicators on some marketplaces. After all, anyone can create their own indicator with a minimum of programming and mathematical knowledge. And, of course, we are sure to find indicators that work almost perfectly. But only for a short time. In the event of a losing streak, beginners usually “tweak” the indicator settings by adapting them to different stock live charts. The Texas Sharpshooter Fallacy is at its best.

Many experienced traders, who have collected statistics, in their interviews are virtually unanimous in saying that the processing of the most popular basic indicators shows at best a 50/50 performance over longer distances.

Why indicators don’t work

The main problem with “best trading indicators” is not their variety and the possibility of “fitting” almost any indicator to a liquid chart of any asset, not in the logic of their authors, but in what they show us. Indicators are usually based on a formula that takes into account certain indicators of price changes. From this we can conclude that no matter how simple or complex the indicators are, they only interpret price changes on the basis of history.

Indicators will ALWAYS catch up with the price and are a priori incapable of predicting the future.

Does this have something to do with the mechanics of the market? Supply and demand? It does not! And it never will.

The market does not care at all about overbought levels, moving averages, and Fibonacci levels. These stock charts indicators:

  1. Do not take into account how liquidity is distributed.
  2. Do not consider which side is creating an imbalance by placing limits on the order book.
  3. Cannot predict when a major player will enter the market, which can easily and at any time turn the market situation 180 degrees.

Think about what he will be more interested in: MACD divergence or the availability of liquidity in the order book to execute at the best possible price?

Robots based on indicators

Imagine that you have tried trading based on indicators and the result has been disappointing, to say the least. And then, especially with the endless advertising of trading bots, you might be tempted to try algorithmic trading. For a fee of tens or even thousands of dollars, this soulless machine is ready to do all the work without any emotions or feelings, strictly according to the algorithm. And it is good if the seller of the trading robot at least gives you a manual explaining which indicators it is based on.

Emotions, risks, and the choice of stop and entry points are no longer your concern. And… failure again.

Of course, the result may be slightly better than manual trading, but that does not mean that the indicator-based trading robot has any special understanding of the market. Nothing fundamentally changes. Indicator-based trading decisions made by a robot, are just put in a nicer wrapper and still have nothing to do with supply and demand.

OK, no need for indicators, so let’s trade the “naked” chart?

Of course, there are many traders who will be foaming at the mouth to prove that you don’t need indicators. The price takes everything into account and nothing else is needed. Not even a volume is required.


Yes, people like to go to extremes. And deliberately deprive themselves of the benefits of cluster-volume analysis. To make an analogy, it’s like trying to guess the contents of a picture from 1-2 puzzle pieces, although no one forbids you to open more puzzles to increase your chances. It seems a bit illogical, don’t you think?

Are there any useful indicators at all?

To be completely objective, there are. Some people call them "volume indicators", while we use the term "horizontal or vertical volume". These are also a type of indicator that shows us the volume traded for a fixed period of time or for a given price range. At least we can compare this volume with the previous one and draw some conclusions. But again, simply increasing the volume cannot be the reason for opening a trade. With the tools of the Resonance platform, you can get much more objective information to help you make a decision about opening a deal.

We have seen time and time again that people who come to our community habitually refer to the BAS, Market Stat, and Market Delta as indicators. And they try to use the readings of the instruments as indicators, e.g. if the Balance Index deviates to a specific value from where there was a price reversal earlier, there is a great temptation to open a trade in the opposite direction. In this case, we try to explain why Resonance tools are so misnamed. And how exactly they should be used.

In my opinion, if we really want to somehow call the Resonance tools, it would be more correct to call them metrics rather than indicators. Once again, I would like to emphasize that when using Resonance tools, we should not get hung up on specific Bid and Ask values in the order book or the Balance/Delta Index. Much more information can be obtained by monitoring the dynamics of the indicators in conjunction with price and volume changes.


Indicators always attract attention because of their simplicity and affordability (although looking at the price of some paid indicators, one could argue otherwise 😊). But the more the trader gains experience, the more he learns about the market mechanics, the laws of supply and demand, and the faster his “evolution” happens. At first, the first seeds of doubt appear in your mind – is the analysis, various indicators and stock trading signals that effective? It is at this point that you must make the greatest effort to clear your mind of useless knowledge that is of no practical use. By entering into this not-so-easy way of analyzing supply and demand, you will open yourself up to new knowledge. And we hope there will be more and more of such people.

Author: Eduard Eduard

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