So I have been doing some basic backtesting with various indicators like moving averages and stochastics I but haven't been able to get any satisfactory results. My profit:loss ratio barely ever creeps above 1:1 or 2:1. I've also tried to compare it to candlesticks over the period, but they sometimes give many false signals too. So I was wondering whether its a matter of selecting the right period or eyeballing it from the charts, or what? I've tried daily and weekly periods on my indicators using fibonacci numbers (3, 5, 8, 13, 21, 34...). But really, it seems like I'm just trying to fit the data to get a return I want. So unless I get something like a 90% accuracy with technical indicators, I probably won't be convinced with my own backtesting analysis...
Appreciate any advice on this. Thanks
Unlike the way I learned how to day trade which an ape would have done better, You have to study charting till any experienced trader can ask you a question and you don't have to think about the answer even if your timeframe is longer. Indicators are best used after you understand charting, and they are used to indicate, but they do not foretell the future nor will charting do this. Forget returns, you are years away from this imaginary concept. Very seldom have in my years been able to use one indicator for both entry and exit where many fail to realize. Only indicators that I made and combined usually price and or volume have made my indicator work for entry and exit. What most newbs and even experienced traders fail to understand what the indicator is supposed to indicate, they come up with clever reasons of why they don't work but they didn't spend years to understand, many have huge egos and can't fathom what they can be losing being so tight receptive to other components can work. It is better they don't hurt themselves and use them, more for me.
Most traders do the same, they concentrate on winning percentages, so they work at better entries. But if you instead concentrate on losing percentages, there are ways to get down to 10% and lower, but much is based on charting and volume, plus hedging can get overall position to have lower losing percentages. Indicators carry least weight but excellent for what they will do, so will say MA is only for trend, can be used to show divergence, slowing down of price action, can show chop, can show better times to do counter-trend trades, will show when not to trade, and longer the period will show one needs much deeper retracements, longer periods better than shorter especially for newbs cause of overtrading, false signals, irregular patterns. Traders have to just plain study patterns and relationships of what happens when price hits patterns, you have to formulate a plan of what to do when at same time think if you were to get in where? and risk? How much time are you going to give it, time often works against the trader unlike options trader who sells. There are many nuances one has to think about coming up to a pattern, breaking out of a pattern, false breakouts-intentional or true reversals.
I wish I could tell you there is one book that fits all, but there isn't. I have just started teaching my son on what to read, study, I have already sent him 75 pounds of books and my old journals and him being a Chess Candidate Master, he knows he will have to study long.
