Page 193 - THE MARKET WHISPERER

THE MARKET WHISPERER 18 9

Indicators, like a compass,
show the direction but not the

path.

Reading a Million Individuals’ Thoughts

We have learned about trends, chart patterns, and indices, and now we
will discuss indicators, which are generally derived from the trend.

Indicators do not usually add new information which cannot be learned
from the chart, but sharpen and clarify the information inherent in the
chart. Let’s say, for example, that you have bought a stock running up,
and you wish to know when to sell it as close as possible to its high. What
defines the high? How can you use the index to identify the high?

SMART An “indicator” is an assistive tool for decision-making.
MONEY Indicators do not add new information, but help us decide
when to hit the buy/sell button.

There are, in fact, no small number of indicators which claim to provide

you with the absolute answer. I would say that indicators are what their

name implies: they provide orientation, but they are not the absolute
final factor upon which your decision should be based. Using indicators is
similar to navigating with a compass. The compass shows which direction

you are facing, but cannot instruct you how to arrive at your destination.

You need to decide which path to take, and often that path will not be

what the compass has shown. If stock trading were as simple as using an

indicator, any computer could replace me successfully!

When I started out as a trader, I relied strongly on indicators. Now, after
many years’ experience, they are well-embedded in my subconscious and I
hardly look at them anymore. Furthermore, to save screen space and “clean