Misrecognition of Indicators ~ Calculation Formula Edition ~

There is still more to think about.

If you’ve already understood and are earning from it, please ignore this as we aren’t writing anything special.

This time, something you all loveIndicatorI’m going to correct the common mistakes about it.

The “Trading will make you win if you do this!” type of things often seen on blogs, YouTube, or products say

When the indicator looks like this…are common.

The reason is simple.

For better or worse,

“Because it is drawn automatically”

Anyone, whether a complete beginner or a veteran, can instantly draw charts for free using tools like TradingView or MT4, and by choosing indicators like

“moving average” or “MACD,” they are drawn immediately.

Unlike lines that traders draw by discretion (such as trendlines or horizontal lines) where placement varies by the person, everyone can draw the same thing regardless of their level.

And the people who explain it usually say this:

“You don’t need to memorize the formulas”

Many people dislike arithmetic and mathematics, so they take this at face value and use indicators without knowing the calculations.

Then they trade believing that when the moving average or MACD gives a golden cross (GC) they buy, and when a dead cross (DC) they sell, and they only believe what’s written.

And when GC/DC happens then they trade, and if it reverses again they“deceive”— what…?

In the worst cases, they don’t even look at the chart, only at the indicator.

They only look at the cross of the indicator and the P/L… not looking at the chart??

Yes, if you can relate to this so far…

It’s really dangerous!!!

As a salon instructor, I’ll write again the very first question I asked the students here as well.

“Yesterday’s USD/JPY rate was 102 yen. Today’s rate is 101 yen.”

“Will the 5SMA (5-day simple moving average) go up or down?”

This is the question I always ask people who ask me about indicators.

I asked this in the salon as well, but none of the respondents answered correctly.

Originally, the people who ask questions are mostly beginners… but over 90% get it wrong.

Most people answer“It will go down”.

This is proof that they don’t understand the formula at all.

5SMA=
{ (closing price 5 days ago) + (closing price 4 days ago) + (closing price 3 days ago) + (closing price 2 days ago) + (yesterday’s closing price) } / 5

That’s right.

The question is, yesterday’s closing price was 102 yen and today is 101 yen.

{ ( ? + ? + ? + ? + 102) / 5 } vs { ( ? + ? + ? + 102 + 101) / 5 }It can’t be compared because some closing prices are unknown.

The answer is

“Unknown”.

Some say this kind of problem is “dishonest” or “cheating,” but…

instead of that, please feel ashamed of your own inexperience, okay?

If the market has moved 98, 99, 100, 101, 102 and today is 101,

yesterday’s 5SMA was 100 and today’s 5SMA is 100.6 (calculation omitted).

Thereforeyesterday’s closing price goes down, but the 5SMA goes up.

In simple terms…

98 yen drops out of the calculation, while 101 yen is added to the calculation. In other words,

by comparing the closing prices five days ago and today, you can tell whether it will go up or down.

That’s what it means to understand the formula properly.

So… right? Momentum indicators, you know?

Do you know the formula?

Momentum = (today’s closing price) - (N days ago closing price)

It’s the same thinking as a simple moving average, isn’t it?

Furthermore… lagging span.

Plot the close on a line chart (1SMA okay), and shift it forward 26 days including today.

You understand now?

We are comparing today’s close to the rate 26 days ago.

Although they look different, the underlying concept is the same.

I also wrote this on Twitter, butStochastics is very famous, isn’t it?

ButWilliams %R isn’t as famous.

(※ Williams %R might be famous too haha)

But in products they often useWilliams %R often intentionally.

Do they want to attract attention with something new?

Let’s check both formulas.

Stochastics (%K)

={ (Today’s closing price − n-day low) / (n-day high − n-day low) } × 100

Williams %R (%)

＝{ (n-day high − today’s closing price) / (n-day high − n-day low) } × 100

Stochastics is higher (parameter: 9), Williams %R is lower (parameter: 9)(the numbers show different reference points, so)

the way the rightmost memory is taken differs.Stochastics looks from the low,where in relation to the current position it is,so it goes down to 0.

Williams %R looks from the high,so where it is nowgoes up to 0 depending on position.

But the oscillator shapes are the same.

In other words, the meaning and foundation are the same!

Why can you say you don’t need to memorize the formulas?How can you say such a careless thing?I can’t understand it?If someone says Williams %R will be like this… please ask them.“Isn’t Stochastics enough?”I actually asked a few people.Everyone passionately argues that Williams %R is better, butwhen you finally press them with “the formulas are the same?”, they fall silent.“Combining Stochastics and Williams %R would be…”some people have said.At this point there are plenty of points to critique, doesn’t it?They don’t seem to understand that looking at Stochastics with multiple parameters is the same idea, right?You can use either Stochastics or Williams %R as you like.I’m not denying either.Use what is easiest for you“and truly understand the meaning”When you use it, you should understand the formula.To do that, you must understand the formulas.“If you use indicators, use ones whose formulas you can understand!”Please remember this today!You can’t use EMA or more complex MA without understanding the simple calculation for SMA, right?Stochastics is also a relatively simple calculation.If you can’t understand Stochastics, you won’t understand Bollinger Bands (BB) any better.Stochastics and BB share the same underlying concept.Stochastics centers at 50%. BB’s center is the SMA.And both look at “where you are right now?”BB is an indicator I’ve used for over ten years, so I’ll write about it in detail someday.Right now I’m not using any indicators, but in the past I used BB and explained it in the salon.I received happy reports saying it was easy to understand and that price movement became clearer.I plan to write more about how to use BB beyond what was introduced in the salon.For reference,In BB,±3σ contains 99.7%, ±2σ contains 95.5%, and ±1σ contains 68.3%.I often see this written, but is it also wrong?People who write this are probablynot truly understanding indicators.I suppose so.I’ll also write about this properly again.That’s all for now.Thank you for reading to the end. m(_ _"m)※P.S.I’m grateful to have received words of thanks from a few people.There are those who said they’d like to repay the thanks including the salon, which makes me happy.Thank you as well m(_ _"m)Expressions of gratitude and kind feelings are always welcome.There was talk of making it paid and closed off for the salon or community, butI’m not considering that for now.Maybe when my younger child enters kindergarten… I might have more time then?If there are still requests then I’ll consider it then, haha.This time, since you asked for thanks, I prepared the paid portion below.That said,there is no article in the paid portionso please beware?It will just show a free illustration that says “Thank you very much.” hahaIf you still want to pay, go ahead hahaI plan to use the money for my son’s Happy Meal and insect gacha expenses? (lol)Gacha machines these days cost 500 yen or so, right?Dad is shocked ∑( ; ロ)゜ ゜ hahaIn return, the details are well-made, though?

How can you say such a careless thing?

I can’t understand it?

If someone says Williams %R will be like this… please ask them.

I actually asked a few people.

Everyone passionately argues that Williams %R is better, but

some people have said.

At this point there are plenty of points to critique, doesn’t it?

They don’t seem to understand that looking at Stochastics with multiple parameters is the same idea, right?

You can use either Stochastics or Williams %R as you like.

I’m not denying either.

Use what is easiest for you“and truly understand the meaning”When you use it, you should understand the formula.

To do that, you must understand the formulas.

“If you use indicators, use ones whose formulas you can understand!”

Please remember this today!

You can’t use EMA or more complex MA without understanding the simple calculation for SMA, right?

Stochastics is also a relatively simple calculation.

If you can’t understand Stochastics, you won’t understand Bollinger Bands (BB) any better.

Stochastics and BB share the same underlying concept.

Stochastics centers at 50%. BB’s center is the SMA.

And both look at “where you are right now?”

BB is an indicator I’ve used for over ten years, so I’ll write about it in detail someday.

Right now I’m not using any indicators, but in the past I used BB and explained it in the salon.

I received happy reports saying it was easy to understand and that price movement became clearer.

I plan to write more about how to use BB beyond what was introduced in the salon.

In BB,

±3σ contains 99.7%, ±2σ contains 95.5%, and ±1σ contains 68.3%.

I often see this written, but is it also wrong?

People who write this are probably

not truly understanding indicators.I suppose so.

I’ll also write about this properly again.

That’s all for now.

Thank you for reading to the end. m(_ _"m)

※P.S.

I’m grateful to have received words of thanks from a few people.

There are those who said they’d like to repay the thanks including the salon, which makes me happy.

Thank you as well m(_ _"m)

Expressions of gratitude and kind feelings are always welcome.

There was talk of making it paid and closed off for the salon or community, but

I’m not considering that for now.

If there are still requests then I’ll consider it then, haha.

This time, since you asked for thanks, I prepared the paid portion below.

That said,there is no article in the paid portionso please beware?

It will just show a free illustration that says “Thank you very much.” haha

Gacha machines these days cost 500 yen or so, right?

In return, the details are well-made, though?