I can't imagine any retail directional model that's able to realistically achieve 90% wins, even automated. At 70% with over 1:1 risk/reward you're pretty much a king regardless of timeframe.
How to improve reliability and consistency of technical indicators?
- Thread starter nxt7
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I can't imagine any retail directional model that's able to realistically achieve 90% wins, even automated. At 70% with over 1:1 risk/reward you're pretty much a king regardless of timeframe.
I have built models that achieve 3% losing averages in ES based on weekly stats, but NOW it is impossible to be able to get into trades comparing it to 3-4 years ago cause ES jumps around so much, you place stops to enter, now there is slippage(I never chase) which means extended risk and reduced reward, so the edges that once it could make are reduced. Plus, if you doing any kind of size, you can forget ever using stops whether for entry or exit or targets. So it now a matter of being able to build low losing system as much as ability to get in, and as a scalper it not that big of deal of making profitable trades, but more like make signals have to be not taken cause if the market goes so many ticks in desired direction without me being in the trade, the signal is voided. I have some 40 trades a week where on paper it be a profitable trade but in real life never got in. I am not retail, but it doesn't matter, can't get in on breakout trades by hitting bid/ask, and even on trades where I am waiting for ES to come back to some area can be frustrating as price quickly comes to some area and like second later it is a full point away, some of my automated systems can't get in fast enough either.
Greetings Nxt7,
Firstly, I would have to ask what you meant when you posed the title question of: “How to improve reliability and consistency of technical indicators?
If in your mind you are asking, if there is a way to improve the capability of any given technical indicator to point out which individual trade will turn out to be a winning trade, then the answer to your question is an Unequivocal No.
There is no technical indicator that has this inherent capability. Nor is there any way to improve the ability of any indicator to tell you what will be a winning trade on a single trade basis. The reason is simple. The result or outcome of any given single trade is random and a function of probability.
However, one could reasonably argue that the HFT’s use indicators to accomplish this feat all the time, and they would be partially correct to a certain degree. But upon a closer examination of HFT operations, one may find that the reason for their uncanny reliability and consistency is based more on their unique access to market data, co-location, speed, and just plain outright and intentional thievery. These I believe are the real factors for them, more so than due to any inherent efficacy of their technical indicators.
Let me also add that from a "Mental Analysis" perspective, I believe this title question is likely unfortunately engendered by what may be an inherent constellation of False and Inoperative Beliefs about the true nature of technical analysis. In others words, you may be "unwittingly" harboring a number of falsehoods about technical indicators, which you have come to accept as "Technical Analysis Gospel”.
This Falsehood that led you to the conclusion that any technical indicator could in fact have this capability, is a mental error in the way you think, and what you are thinking. A mental error that will lead, and will cause you to experience future technical difficulties in your market operations because you are not building your market endeavors from a base of truth. They will not stand the test of time, or avoid the inevitable Law of Averages.
Now let me explain what I'm saying, and what I mean to say, before all the other ET Folks who believe as the Op believes, come out of the woodwork in fervent attack mode. Please understand, I'm not here to preach "My Gospel", nor to make any converts,...only to express my own beliefs and opinions on this interesting controversial topic, and present my reasons behind those conclusions.
But I do believe that in order for one to ask a question such as this title suggests, one would first need to have a Belief System in place that currently accepts as truth that;
“A technical indicator is in fact capable of selecting a winning trade on an individual or single trade basis.” This is patently not true.
Understand, technical indicators cannot tell you that any individual trade will be a winner or a loser on an single trade basis. But technical indicators, when properly used and structured, can tell you whether the statistical odds favor a particular trade, and whether those selected trades will be a Winners or Losers on that Probabilistic Basis.
In other words, by and large you can have the ability to Win the Game over a Statistically Significant Series of Trades, provided you have a positive probability. That's because in this case, there will be more Winning trades than Losing trades, and that truly represents a statistical odds advantage “Edge” in the market.
Sadly, these falsehoods of what indicators can and cannot do, are shared by many neophyte traders, and even a few experienced TA practitioners. And these views are highly pervasive in the whole TA Community at large. I also personally believe that this one single falsehood belief, is largely one of the most significant contributors to most of the trader failures in this field of endeavor, at least in my experience.
And that,...in my opinion, is my 2 cents worth on your question.
I hope this helps.
KDASFTG
Firstly, I would have to ask what you meant when you posed the title question of: “How to improve reliability and consistency of technical indicators?
If in your mind you are asking, if there is a way to improve the capability of any given technical indicator to point out which individual trade will turn out to be a winning trade, then the answer to your question is an Unequivocal No.
There is no technical indicator that has this inherent capability. Nor is there any way to improve the ability of any indicator to tell you what will be a winning trade on a single trade basis. The reason is simple. The result or outcome of any given single trade is random and a function of probability.
However, one could reasonably argue that the HFT’s use indicators to accomplish this feat all the time, and they would be partially correct to a certain degree. But upon a closer examination of HFT operations, one may find that the reason for their uncanny reliability and consistency is based more on their unique access to market data, co-location, speed, and just plain outright and intentional thievery. These I believe are the real factors for them, more so than due to any inherent efficacy of their technical indicators.
Let me also add that from a "Mental Analysis" perspective, I believe this title question is likely unfortunately engendered by what may be an inherent constellation of False and Inoperative Beliefs about the true nature of technical analysis. In others words, you may be "unwittingly" harboring a number of falsehoods about technical indicators, which you have come to accept as "Technical Analysis Gospel”.
This Falsehood that led you to the conclusion that any technical indicator could in fact have this capability, is a mental error in the way you think, and what you are thinking. A mental error that will lead, and will cause you to experience future technical difficulties in your market operations because you are not building your market endeavors from a base of truth. They will not stand the test of time, or avoid the inevitable Law of Averages.
Now let me explain what I'm saying, and what I mean to say, before all the other ET Folks who believe as the Op believes, come out of the woodwork in fervent attack mode. Please understand, I'm not here to preach "My Gospel", nor to make any converts,...only to express my own beliefs and opinions on this interesting controversial topic, and present my reasons behind those conclusions.
But I do believe that in order for one to ask a question such as this title suggests, one would first need to have a Belief System in place that currently accepts as truth that;
“A technical indicator is in fact capable of selecting a winning trade on an individual or single trade basis.” This is patently not true.
Understand, technical indicators cannot tell you that any individual trade will be a winner or a loser on an single trade basis. But technical indicators, when properly used and structured, can tell you whether the statistical odds favor a particular trade, and whether those selected trades will be a Winners or Losers on that Probabilistic Basis.
In other words, by and large you can have the ability to Win the Game over a Statistically Significant Series of Trades, provided you have a positive probability. That's because in this case, there will be more Winning trades than Losing trades, and that truly represents a statistical odds advantage “Edge” in the market.
Sadly, these falsehoods of what indicators can and cannot do, are shared by many neophyte traders, and even a few experienced TA practitioners. And these views are highly pervasive in the whole TA Community at large. I also personally believe that this one single falsehood belief, is largely one of the most significant contributors to most of the trader failures in this field of endeavor, at least in my experience.
And that,...in my opinion, is my 2 cents worth on your question.
I hope this helps.
KDASFTG
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NX7
When you look into a crowd who do you see ?
When you look at a chart what do you see ?
When you see someone you know in that crowd, you wave and try to get their attention, same thing with charts. you get to know what works (your patterns are your friends) Get to know them.
"Price patterns and familiar setups"
That's what most experienced do.
Over time you get to know which ones are your friends and which ones you never touch again.
This is just part and many more factors to consider but that will get you started.
When you look into a crowd who do you see ?
When you look at a chart what do you see ?
When you see someone you know in that crowd, you wave and try to get their attention, same thing with charts. you get to know what works (your patterns are your friends) Get to know them.
"Price patterns and familiar setups"
That's what most experienced do.
Over time you get to know which ones are your friends and which ones you never touch again.
This is just part and many more factors to consider but that will get you started.
I think new traders like him probably saw some advertisement somewhere where "Forex Automated Trade Signals with 90%" win rate or they saw someone talk about such in their trading with proof such is possible or maybe they saw some charting service use that type of language when using indicators to attract clients to their data.
For example, I remember an old advertisment by Qcharts (now owned by eSignal) when it first started...
"most accurate indicators in the industry".
Thus, that belief of search of the holy grail (90% win rate) is something being thrown out there by advertisements by a data source or by some forex system.
At the micro level, a complex retail algorithm might be able to do it, but it would have to be involved in the order flow. I really have no desire to compete for that market share with my resources. If I could get 1/2 of my losing trades to just breakeven, I would be a superstar, and even that would involve some complex management. I prefer to just dissect the market into sections and take what's offered. It's simple and effective