Thanks for your reply tom. I appreciate it.
"Easier" is not actually what I'm focusing on at the moment. I'm focusing on a certain "edge," and sometimes that's actually "harder."
About a year ago, quite by accident, as I was fiddling with the math of two very common "indicators," and one of JM Hurst's creations, and I noticed something in the chart formations of the YM on the 6 range chart that caught my attention. Since that day, I've been developing a trading system around those very unique and highly regular patterns as captured via the mathematical combination of these "indicators." I've only seen it on the 6 range bar charts and on the YM.
The Achilles heel of the system at the moment are these occasional "fakeouts" which occur during the YM's "Russell-inspired" flushes. They throw off my testing numbers and I'd like to find an elegant way of eliminating them. I'm certain there is a way, and I'm looking for creative sparks from other sharper minds here at EliteTrader.
With regards to using oscillators and crossovers, there's actually a very good reason to use both. The fact that 90% of the traders out there (including some of the biggest names in the business) are using them, and usually all around the same pivot numbers and formations (i.e. flags, fibs, 2/20 Bollingers, Keltners, Donchian, 30MA, 50MA, 200MA, and 12/26/9 MACD, etc.). There's actually quite an edge in studying the math of the herd, which is what I'm doing at the moment.
Think about it this way: If everyone bought the market when Eastenders came on television at it's regularly scheduled time, and then sold the market when the BBC came on the air in the morning... What would be a good time to buy the market? Would you buy at noon, or would you wait until just before Eastenders came on the air? Now... imagine instead of just two television shows, there are 25. The concept is still the same. It's just the math that's more complicated. But that's why we have computers.
Mathematically, what Ehlers and others are doing, is capturing the "oscillation" of all these traders using their different methods. At some point, there exists a "harmonic" of all this activity. A certain frequency at which they all harmonize. If everyone was using stochastics set at the same settings, along with the same type chart series, we could more easily see the frequency. Same with Bollinger bands, etc.
Crossovers and oscillators probably don't really say anything about what's actually happening at the price level (maybe Market Delta does... maybe). But, they are very accurately telling me what the herd is doing. The herd is a powerful force (just turn on the news sometime).
With regard to autocorrelation of time series and baskets, I agree with your assertion, provided you don't already have an edge with the system you've developed. As a trader, I'm not looking to take home a million dollars everyday... because I know that's not going to happen, even at the best of times, but... a consistent percentage gain in my portfolio is what I'm after... a simple, repeatable and consistent percentage gain, day after day, and week after week. If a trader finds a way to achieve this... an edge... my recommendation is (especially to myself): "stop looking around, put your head down, and plow, plow, plow until that edge is no longer producing." Linda Bradford Raschke is a perfect example of this mode of thinking.
Just a few thoughts.
I'm curious to know how you would approach getting rid of those momentary price reversals I mentioned in my original post. Have you given that any thought? What would you do in my case (keeping in mind that I want to keep the system I have)? Your thoughts would be much appreciated.
-PD
