There was a time when I was obsessed with indicators. Over the past four years, I spent countless nights collecting over 2,000 indicators. Of course, 99% of them came from discussions by various experts and forum moderators, while 1% were my so-called optimized combination indicators. After all the research, I came to a conclusion: the change in any indicator is ultimately tied to price and volume. To see the essence through appearances, the simplest is the best and also the truest.
Conclusion 1: The more complex the indicator's calculation, the lower its reliability.
The closer to the essence, the stronger the reliability.
Price is represented by candlesticks, and volume is represented by volume (VOL)! This is the essence—naked and real. Any indicator extends from this basis, and the more complex the extension, the further it is from the essence, making it less effective. Candlesticks and volume are like a naked woman, while other indicator formulas are like her clothes and makeup, ultimately leading to plastic surgery. Therefore, indicator formulas easily lose their essence and become something fake.
Take MACD as an example: From price (C), two moving averages (MA) are extended, then their difference (DIFF) is extended, then the average difference (DEA) is derived, and finally the double difference between DEA and DIFF gives the classic MACD. Here's a mathematical calculation: if each extension has a 90% reliability, after five extensions, the reliability would be 0.9^5, resulting in a final reliability of 59%. However, many of the indicators I collected are extensions of MACD, and many of them extend dozens or even hundreds of times, so their reliability is almost nonexistent. Hence, I deleted them.
Conclusion 2: The trend is our only reference.
Indicators should focus on trend judgment, not buy/sell points.
After many years of stock trading, I have won in bull markets and lost in bear markets, even incurring overall losses. Despite having many indicators—many so-called premium indicators related to following big players, capital, stock picking—most people still fail to capture profits that they should have, sometimes even losing more. Therefore, I believe the key is: understanding the trend. When the trend is positive, no matter what you try to convince me, I won't exit. When the trend turns negative, no matter how you rush me, I won't enter. Even including policies, trends are not subject to personal will. No one can resist the trend, just as societal development is not subject to individual consciousness. It is inevitable. So, why abandon the inevitable trend in pursuit of uncertain buy/sell points?
Conclusion 3: The more indicators you refer to, the harder the operation and the higher the likelihood of failure.
Everyone working with indicators has a large number of them in their computers—hundreds, even thousands—hoping to find a 100% accurate, top-tier indicator. Unfortunately, there isn’t one! And I can tell you there never will be. The reason is that if there were, no one would be working anymore, and the stock market would cease to exist. Since the accuracy of any single indicator isn't high, we refer to multiple indicators. But I tell you, doing so weakens the explanatory power. A simple math operation shows that if a single indicator has an 80% accuracy, using two would give 80% * 80% = 64%, and five would give 33%. I've seen many people combine multiple formulas with high success rates, and when the market is favorable, the success rate is acceptable. But when the market is unfavorable, they don't even know how they lost money.
Conclusion 4: Indicators are just references.
Big players only profit by going long, aiming for maximum profit.
Participants in the stock market are human, so there is much uncertainty. Who says KDJ death cross at high levels will definitely lead to a drop? Who dares to say that RSI at high levels marks the top? The big players unload, and it shows that they are reducing their positions. And don't even get started on using our own created indicators. Please remember, indicators are just references! There are plenty of stocks that move against indicators.
We need to understand the purpose of market participants. All capital involved in the market is driven by self-interest, and everyone is here to make money. Big players are, of course, aiming to make more money. In the A-share market, due to low dividends, most investors are focused on capital gains. This creates issues like fluctuations, wash trading, and price surges. The goal is to maximize profits, which ultimately comes down to distribution. The big players can only profit by driving up stock prices, so their operations should be clear to everyone.
Conclusion 5: Overcome human weaknesses and form your own profit model.
Human weaknesses—fear and greed—are the stock trader's greatest enemy. The reason they are most evident in the stock market is that most people have not developed their own trading methods or profit models. A profit model, for example: when the 30-day moving average flattens and then turns upward, buy; when the 30-day moving average flattens and turns downward, sell. This is a model. No matter what happens in the meantime, I will follow this model, only profiting from what is mine. This reduces greed and fear, eliminates unnecessary sacrifices, and there is no need to stare at the charts all day.
