Why Default Indicator Settings Suck For Swing Traders

I don't know who came up with the default settings for technical Swing indicators but sometimes you have to ask, "What were they thinking?". They certainly didn't have swing traders in mind!

This Swing sucks!

The market has been rallying for weeks and if you were a follower of Williams %R with the default setting (14)...well...let's just say that you haven't been trading much! Not one "oversold" signal. The market has taken off without you.

This makes the default setting pretty much worthless.

But, look at what happens when you change the "14" to a "3"...

Sooooooo, much better! This setting is calling short term swings like a pro! Ok, it's not perfect but it sure is light years ahead of that crappy default setting.

Now, lets look at another popular technical indicator, RSI, with the default setting...

Total Swing Traders suckfest!

I don't know how anyone can possibly use this indicator with this Swing setting. But, look at what happens when you change that "14" to a "2":

Trader Vic's Trend Change Example on S&P Hourly Chart

How do you tell if a trend is going to change? Use Trader Vic's rules for a trend change...

1. A trend line is broken
2. The trend stops making higher highs.
3. Price falls below prior low.

Here is an example of these rules on the hourly chart of the S&P 500:

The first rule has been met. There has been a trend line break. Now we are watching for the "retest" of the previous high (top highlighted area). If it fails to move above that area then rule #2 will be met.

Then, if it falls below the prior low (highlighted area), it will be a confirmed change in trend. From the book...