Anyone using indicators successfully for day trading?
- Thread starter Howard
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I think a key consideration for an indicator based system is that it needs to adapt to changing market conditions. Ideally, it's auto-adaptive (hence why I find MAMA interesting). We're currently in conditions where the average daily range is twice what it was two weeks ago.
Also, ideally there'd be a way to differentiate between trending and ranging days in order to elminate whiplash trades on a trend day.
An example would be Tuesday this week in ES. I early on recognized it as an up trend day, so I decided I would not be playing the short side that day. Had I been using indicators (which I'm currently not doing, but plan on doing as more testing is done), I imagine it could have given a few false signals if I relied on those alone.
Any comments from those of you successfully using indicators as how you deal with changing market conditions?
Do you adjust your settings? Do they adjust manually or do you have a catalogue of settings updated relative to fixed intervals/ratios?
Also, ideally there'd be a way to differentiate between trending and ranging days in order to elminate whiplash trades on a trend day.
An example would be Tuesday this week in ES. I early on recognized it as an up trend day, so I decided I would not be playing the short side that day. Had I been using indicators (which I'm currently not doing, but plan on doing as more testing is done), I imagine it could have given a few false signals if I relied on those alone.
Any comments from those of you successfully using indicators as how you deal with changing market conditions?
Do you adjust your settings? Do they adjust manually or do you have a catalogue of settings updated relative to fixed intervals/ratios?
Well, I should clarify that I tested “the shit out of indicators” on the FX market which I concluded are pretty random. I spent almost 3 years reading guru’s books and testing various algo strategies. I also did correlation tests of most common indicators and also fancy “adaptive” indicators created by super smart PHDs, which showed me there was no correlation between the indicator and future price. The only indicator which was correlated is the measurement of how many standard deviations current price is from the mean - like a bollinger band. I had a strategy if price is > 2 standard deviation between 9am and 10am buy/sell in the same direction and then follow it with a trailing stop. This was actually working for a while because of morning news releases.
Now I’m into algo trading order book flow which actually has predictive power. I’m also using “indicators” but very differently - mostly to smooth out or normalize values going into a neural net.
If you’re a discretionary trader, looking at charts and trade using indicators and making money, good for you, because around 95% of your piers are losing money with this approach, so that’s telling you something.
Now I’m into algo trading order book flow which actually has predictive power. I’m also using “indicators” but very differently - mostly to smooth out or normalize values going into a neural net.
If you’re a discretionary trader, looking at charts and trade using indicators and making money, good for you, because around 95% of your piers are losing money with this approach, so that’s telling you something.
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It's nice that you finally found something that works for you, robthequant, but you shouldn't write off indicators just because you didn't understand them or find them useful.
I have been skeptical of indicators myself in the past. Partly due to people claiming them to be useless (and me believing that without doing my own investigations).
Now that I'm more mature I can see the value and use of indicators, although I have not yet put together a complete system using them yet. I have however already made some interesting discoveries which aligns with my current methodology.
I have been skeptical of indicators myself in the past. Partly due to people claiming them to be useless (and me believing that without doing my own investigations).
Now that I'm more mature I can see the value and use of indicators, although I have not yet put together a complete system using them yet. I have however already made some interesting discoveries which aligns with my current methodology.
It is a waste of time in arguing whether indicators work or Not work, and majorly there are three camps:
1) That didn't work: tons of people are just frustrated because they thought they spent years and they beat their brains out working on single, double, group of indicators in combination, changing parameters and exhausted in almost every way they can imagine, day in and day out, and still failed miserably (even though with some random and erratic success) , and many of them thought they are smart enough as they were so successful in their other careers, and finally they concluded indicators never work and give up.
2) That Partially work: some people developed better understanding of the price action and price movement and integrated certain indicators and somewhat make it work in certain conditions; however, their demonstrations and performance are not convincing enough to impress the doubtful traders, because experience and empirical ability is hard to transfer between traders and also their indicators only worked from time to time, on and off.
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3) That genuinely work and work consistently: Very few finally established and designed something that worked so magically consistent, then they would not reveal or sell their recipes, even for a million buck. Then you don't see them come out to claim and to show their repertoire to convince people. No need. They know what they got.
1) That didn't work: tons of people are just frustrated because they thought they spent years and they beat their brains out working on single, double, group of indicators in combination, changing parameters and exhausted in almost every way they can imagine, day in and day out, and still failed miserably (even though with some random and erratic success) , and many of them thought they are smart enough as they were so successful in their other careers, and finally they concluded indicators never work and give up.
2) That Partially work: some people developed better understanding of the price action and price movement and integrated certain indicators and somewhat make it work in certain conditions; however, their demonstrations and performance are not convincing enough to impress the doubtful traders, because experience and empirical ability is hard to transfer between traders and also their indicators only worked from time to time, on and off.
.
3) That genuinely work and work consistently: Very few finally established and designed something that worked so magically consistent, then they would not reveal or sell their recipes, even for a million buck. Then you don't see them come out to claim and to show their repertoire to convince people. No need. They know what they got.
YIPES!
As a long-time user of various T/A tools, I find this laughable -- like testing aluminum bars for aeronautical usefulness, and finding them wanting.
So, how does one "correlate" a common indicator with future price?Any explanation of the gazillion or so systematic traders/funds around the world who turn "T/A" into the more acceptable "algorithm" and quietly chug in reduced-risk, market-meeting/beating results?
What am I missing, Rob "the quant"?
{{Ooops. Never mind: "I’m also using “indicators” but very differently - mostly to smooth out or normalize values going into a neural net." Dude, you're using T/A no differently than anybody else. AND, you're doing well. Which is *great*. But the majority of your post denigrates T/A. What YOU do -- IS "T/A".
}}
Super-LIKE to jL1575's post above: "Nailed it!"
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When someone claims "indicators works" that means he is claiming that they have predictive power to help him forecast future price or direction to some extent, do we agree on that?
Using statistical methods and writing a testing software you can test this claim, which I did on FX. If you do this exercise you will see that there is no statistically significant relationship between future price change and current value or pattern of an indicator. So for example after MDAC crossover you measure the change in the price in future X bars. Where X can be like 1 to 20. You test different values and time frames. Soon you will discover there's not much correlation or relationship. I'm not talking 100 datapoints like they do in books to show you it works... that can be done easy, it's just a curve fit. I'm talking about at least 1000 data measurements or more.
Of course you may find traders who know nothing about statistics, trade profitably with "indicator confirmation" which does not mean the indicator works, it may mean their brain is well tuned to the price action, and the "confirmation" from the indicator actually means nothing, and they could actually trade without it.
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