Adjusting intraday indicators for overnight gaps
- Thread starter trader#21
- Start date
Indicators were invented for smooth daily data. Using indicators in intraday trading does not make any sense for the reason you described and for many other reasons. Especially smoothed indicators that are dependent on initial points. Yet, many uninformed traders use them and get all sorts of false signals.
Just drop them and learn how to trade pure pirce action.
At some point in learning to trade, you reason through how adjacent bar events work out.
At that time, you go to your platform library and add the coding to your display which degaps adjacent bars.
Also by that time you would have dropped the use of lagging indicators. Only take leading indicator signals from leading indicators.
If you find out that your platform cannot degap automatically, dump it and get a platform that is a contemporary one.
Just to let you know, it is difficult to address some issues with some platform providers. It is even more difficult to explain to their programmers how to do the coding. Usually you have to not only provide educationh to them you also have to provide the coding if they do not have a global variable as part of their system.
Quote from trader#21:
I use custom indicators only- which are quite different from classic indicators everywhere around on internet. So taking a clue from my last 6 years of PnL sheet, I would happily disagree
Yes, he is incorrect and you are correct.
Probably, most ET'ers have not seen P 'nL's like those of people who are adding degrees of freedom by customizing clean data.
Most do not even know they do not have clean data.
The most straightforward way is to maintain a running summation of overnight gaps (Open - Close[1]) and apply it to all four price values of every bar.
You may want to collect some statistics intraday to determine if you should adjust the overnight gap to more closely mimick intraday close/open gaps.
However, for very liquid markets that shouldn't be an issue.
Quote from trader#21:
Isn't adding degrees of freedom (in general) gives less stable strategy?
No.
the input data from markets runs at under 10 degrees of freedom.
For whatever silo I have developed, I have found that about 70 degrees of freedom is the maximum set of system data feeds that can be developed.
this expansion is followed, in logic, by a funnelling down to the decision and action phases of sophisitcated trading logic.
In MADA as opposed the the risk taking OODA paradigm, monitoring is immediately enhanced with tooling (indicators, usually leading) and then greatly enhanced during analysis). All of this follows the task of eliminating the use of time from markets.
I use the expression "Steer and focus" as descriptor of what is going on to cull one's way to focusing on decision making and then carving the evently (timely to others) action.
Stability does not come in OODA as you well know. It was too bad that it became the CW of the industry. Science is the alternative to risk betting.
I am probably one of the leader's in relating to extracting the full offer of the market. Unmatched is probably the most explicit descriptor.
I was sorry to hear that you are stuck where you found yourself.
Showing you a few indisputable leading indicators would be a waste of your time. try reading Larry harris