Theoretically, shouldn't any indicator-based or relatively simplistic strategy have no edge at all?

C

CyJackX

If you're using an indicator, or some combination of indicators that any algorithm could easily backtest, wouldn't algorithms have arbitrated any edge away?

If there exists a pattern that has an edge, wouldn't an algorithm be able to trade it far faster and earlier than you? Quants could easily get paid to write an algo that tries out every combination of indicators on every timeframe...

Granted, by the same logic, that edge would eventually no longer exist to the algorithm either thru alpha decay...

Suffice it to say, it seems that any good edge is outside the realm of inside-the-box thinking with regards to indicators or simple price-action.

I'm a fan of technical analysis, but if I follow the logic of "if it works, somebody or some machine has already leveraged it to the maximum" then it seems that only leaves fundamental predictions?

Or is it like Heisenberg's uncertainty principle; everybody interacting with the same pattern will fundamentally alter the pattern so that it doesn't end up being what everyone predicted, and we can only see the true patterns in hindsight?
 
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I used to have hundreds of indicators.
Now I have none.
But that doesn't mean trading is very simple / easy.
trading is extremely hard work.
It involves spending thousands and thousands of hours staring at charts.
Many people thought you can learn trading in just a few weeks.
That happens once in a billion.

Of all the professions, trading is the hardest.
Because it doesn't use logic.
 
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CyJackX said:
If you're using an indicator, or some combination of indicators that any algorithm could easily backtest, wouldn't algorithms have arbitrated any edge away?

If there exists a pattern that has an edge, wouldn't an algorithm be able to trade it far faster and earlier than you? Quants could easily get paid to write an algo that tries out every combination of indicators on every timeframe...

Granted, by the same logic, that edge would eventually no longer exist to the algorithm either thru alpha decay...

Suffice it to say, it seems that any good edge is outside the realm of inside-the-box thinking with regards to indicators or simple price-action.

I'm a fan of technical analysis, but if I follow the logic of "if it works, somebody or some machine has already leveraged it to the maximum" then it seems that only leaves fundamental predictions?

Or is it like the uncertainty principle; everybody trading the same pattern will fundamentally alter the pattern so that it doesn't end up being what everyone predicted, and we can only see the true patterns in hindsight?
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Full disclosure I am no guru and certainly haven't made a fortune trading. Relatively recently I've made some break through's though and I am trading pretty well.

Anyways from my experience and from watching a fair amount of successful traders who trade full time live, over all no. The market is not that figured out yet to where you can't find a relatively simple strategy that produces money.

First of all just in my experience a lot of traders fail due to other factors not related to strategy or technical analysis. Biggest one being not mentally prepared to trade and having financial responsibilities where they are either forced to take trades they shouldn't or at the very least feel like they are forced to trade to make money because they have bills due.Which I guess is related to being under funded as well, but not necessarily directly.


Also, there are competing forces in the markets(which opens up opportunities for you when one of them gets pushed out or losses). So if you jump into a trade with no plan and no strategy that you become part of the market supply that is going to get pushed around and now the market controls you. If, however you have a plan and you wait for some type of imbalance or extreme move in the market where someone else has been forced to short cover or forced to capitulate their long and than you now execute your plan, you're now in a much better position and have a reasonable chance of making money (of course assuming you have a decent strategy and are mentally prepared to trade).
 
Any and all indicators run off of 2 sources of time-based information: volume which is an independent variable and the resulting price, which is a dependent variable, following the law of supply and demand. Both are generally accurate and available to the world.
Accordingly, sites that sell indicators go to great lengths to claim outrageous, ridiculous galactically stupid advantages seen in this video "Worlds Best Indicator":
.

Indicators claiming low or zero lag (Hull Moving Aver) are a mathematical farce as the ability to "indicate" is not quagmired by lag. Grouping indicators or using fractal analyses does not increase your data base or knowledge of the next move in price, which is what indicators are supposed to indicate. One way to get an "indication" of what will happen is look for time-based (circadian rhythm, diurnal variation) behavior.
 
Simple is better because you have less opportunities to screw up and make foolish mistakes. The more complicated your trading system is, chances are good, you are a pretty bad trader. When most of the best hedge fund managers out there just follow the trend, re-inventing the wheel seems to me, pretty dumb. Why fix something that isn't broken?
 
The hubris you retail traders have. As if you are so big and moving so much money that you cant take advantage of "typical" indicators. HFT firms have bigger fish to fry than using and exhausting what retail traders use. It isnt even a fuckin thought. THey are competing against themselves - it would be downright retarded to focus on small fish like retail - all of retail are small fish comparatively.

not to mention the strategies that work for you piker retail traders with small accounts, lets say less than 20mil, will not be the same strategies people who manage 100mil+ use. None of you will get close to having a 20mil trading account - nor do you need that much to make a very privileged living relatively speaking.

Not to mention most typical indicators, since so many people use them, are self fulfilling prophecies.

If edges in poker havent been figured out when there are only a finite amount of possibilities/combinations then the markets have a long way to go to figure out truly unpredictable behavior on any given trade.

Stop trying to put a bandaid on your own shortcomings saying "i have no edge cuz the bots took it away from me." You have no edge because you arent paying attention and learning because you are too worried about people whose league you will never come close to - as far as multi-million dollar trading accounts go.
 
You’re right. There’s no edge in technical analysis. I’m honestly confused as to why so many people use it — a lot of those indicators were developed in the 70s-90s. There are much better ways to trade now, but for some people, trading is all about the “experience” (point and click on a chart) and not the outcome (making money on a signal you identified after rigorous analysis).
 
CyJackX said:
If you're using an indicator, or some combination of indicators that any algorithm could easily backtest, wouldn't algorithms have arbitrated any edge away?
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Bingo! Especially intraday.

It's important to grasp that price patterns, indicators and the like don't actually cause any market movements, or provide any significant edge themselves. More than anything else, these are just tools for managing risk.

After the Covid bottom this year, tons of stocks printed reversal patterns, breakouts, divergences etc and then gave further signals during the summer bull run. The decisive point (and source of edge) wasn't the entry signal(s) but understanding that we were in a tech-focused bullish frenzy.
 
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