The answer I gave will lead your leading indicator.
Mark
Leading Indicators
- Thread starter toc
- Start date
The answer I gave will lead your leading indicator.
Mark
There's a fairly old book about computerized technical trading, which focuses on the futures markets. You might find it irrelevant because it was published in 1992. Or you might discount it because you don't trade futures. However, the book (link) does contain an interesting paragraph on page 77. It is discussing a certain indicator which I will represent here using the symbol XXX, to encourage you to find and read the book 
. It's on the shelf in many libraries, it's on the shelf at the Borders book store near me, and it's available for purchase (new or used) at Amazon.
. It's on the shelf in many libraries, it's on the shelf at the Borders book store near me, and it's available for purchase (new or used) at Amazon.- In our regular talks with other traders, we have found that more of them use XXX than almost any other tool, except perhaps moving averages. XXX isn't always used as their primary study, but the traders monitor it closely and use it with other technical studies to arrive at more timely trading decisions. Among the many reasons for the popularity of XXX are its simplicity, its versatility, and the fact that it is considered to be a rare "lead indicator." Rather than merely reacting to the direction of prices, XXX can change direction before prices change direction. Very few technical studies can provide a trader with this valuable lead factor.
toc - OK, this wasn't working as I was hoping.
Here's the deal - in my opinion - a 'leading indicator' that is based on past price movement is an oxymoron. Think about it... you are just using the past to try to predict the future.
Again, most indicators work if you test them and use them regularly. If you like Bollinger Bands, then use them every day. You can't jump from indicator to indicator as soon as one fails.
Mark is also bringing up excellent points and I suggest you read his posts.
Good luck!
Relative strength neutralizes market influence, leaving a synthetic price moving (up or down) on its own accord.
Relative strength will often fade BEFORE the underlying price does or.........bottom and rise before price. Doesn't hurt to have divergence between four points (two price and two RS)
Secondly, volatility is more predictive than price. Quiet leads to range expansion or the converse. Of course the direction remains to be seen. ATR being the narrowest in a period of time (Crabel's NR-7), ADX below 20 or a tight Bollinger band width or a tight cluster of those "lagging" intermediate (30 thru 50 day) moving averages.
Certain seasonality aspects. The Thursday of the week BEFORE option expirtation week is a probable time to be long. Ditto for the last day of the month and first four of the new month.
Something to be said for not jumping from indicator to indicator but.............that holds true for fixations on entry. Your money is made on EXITS and position size determines how much you extract (or lose).
Relative strength will often fade BEFORE the underlying price does or.........bottom and rise before price. Doesn't hurt to have divergence between four points (two price and two RS)
Secondly, volatility is more predictive than price. Quiet leads to range expansion or the converse. Of course the direction remains to be seen. ATR being the narrowest in a period of time (Crabel's NR-7), ADX below 20 or a tight Bollinger band width or a tight cluster of those "lagging" intermediate (30 thru 50 day) moving averages.
Certain seasonality aspects. The Thursday of the week BEFORE option expirtation week is a probable time to be long. Ditto for the last day of the month and first four of the new month.
Something to be said for not jumping from indicator to indicator but.............that holds true for fixations on entry. Your money is made on EXITS and position size determines how much you extract (or lose).
all indicators lag the daily prices because they are derived from daily prices and volume. just think about it.. if someone had a predictive indicator, he would own the world. if someone knows an indicator which will tell me what will happen to prices in one minute, i will be very happy to pay him big bucks. one might then say.. why do we have all the chart services and indicators if they don't predict the market? i can't answer that one.
Theoretically anyway, this isn't true. Some indicators (for example, MESA) are cycle based. They purport to tell you the period of the cycle and where you are within the cycle (what is your "phase angle") at the current moment. IF (a big if) the indicator gets this correct, it allows you to project forward and identify cycle turning points (tops and bottoms) in advance. It's a leading indicator. Welles Wilder's "Delta" indicator, based upon lunar cycles, projects many months in the future.
But that's just the theory. Whether these indicators do in fact produce healthy profits for those who trade by them, is another question.
What else could you possibly use to predict the future? Think about it... any prediction of what will happen or is most likely to happen has to be based on what has happened in the past. This is true in trading, scientific research, sports, whatever. The problem is to be able to assess all relevant factors in the field you're studying and find patterns that are reliable enough for your purposes, assuming that there is enough regularity in the data and your desired success rate is realistic.
Heh, still after the grail.....(me too).
Indicator wise, divergence is the only thing that actually leads, right?
And the reason for that, is the money in the meantime, is on the other side of ones divergence, so that still makes it a MM and strategy issue....
Apart from pattern analysis-im convinced there are occasions, where prior chart behaviour can be "extrapolated" into likely future behaviour, the specifics of the x/y amplitutdes being a bit fuzzy, but the likely "look" of an upcoming move becoming reasonably predictable.
But that's still subjective, isnt always right by any means, so could it be the only true leading indicator, ultimately, is intuition?
Indicator wise, divergence is the only thing that actually leads, right?
And the reason for that, is the money in the meantime, is on the other side of ones divergence, so that still makes it a MM and strategy issue....
Apart from pattern analysis-im convinced there are occasions, where prior chart behaviour can be "extrapolated" into likely future behaviour, the specifics of the x/y amplitutdes being a bit fuzzy, but the likely "look" of an upcoming move becoming reasonably predictable.
But that's still subjective, isnt always right by any means, so could it be the only true leading indicator, ultimately, is intuition?