No they don’t.
Video , why do indicator based systems fail.
- Thread starter Murray Ruggiero
- Start date
The Fourier Transform analysis of time domain signals that consist of discrete frequencies components added together can be amazingly useful if it is specifically the discrete frequency components that we are after, as for example in various types of spectroscopy. In principle any the time domain signal, such as a chart of closing prices for ES, can be reproduced using a sum of transcendental functions. You can then look at the amplitude and frequency of each transcendental component. This comprises what would be called the frequency domain spectrum of the time domain picture,i.e., of the ES closing prices plotted out. But in the case of a futures chart, what exactly does knowing the frequency components and their amplitude tell you? I'm certain Goldman's quants (the financial industry is the largest employer of Ph.D. physicists in the U.S.) long ago transformed the S&P or the ES into its frequency domain. But what did they discover? Apparently not enough to save them without Fed and Treasury help.
Indicators sometimes work. BUT they do not work every time. Otherwise, there is no need to work... just trade stocks. This is a quote from Don Guyon's One-Way Pockets (written about 100 years ago).
On the other hand, the operating plan is not akin to any of the arbitrary systems of chart play which have been in vogue during recent years. There was a time in Wall Street when chart students could and frequently did make money by playing their various systems, but that was before the Street was surfeited with literature treating of market technique. Now the followers of charts are legion; two out of every three active traders keep either a written or a mental record of tops, bottoms and accumulating and distributing areas, and consequently are fooled persistently by the large operators, who '"work" the chart readers and their following at every available opportunity.
If have time, do watch the Horizon : The Midas Formula. But the documentary didn't talk about the large operators on the opposing side that "work" on the formula and "profit" from it. What moves the market ? Retail operators ?
On the other hand, the operating plan is not akin to any of the arbitrary systems of chart play which have been in vogue during recent years. There was a time in Wall Street when chart students could and frequently did make money by playing their various systems, but that was before the Street was surfeited with literature treating of market technique. Now the followers of charts are legion; two out of every three active traders keep either a written or a mental record of tops, bottoms and accumulating and distributing areas, and consequently are fooled persistently by the large operators, who '"work" the chart readers and their following at every available opportunity.
If have time, do watch the Horizon : The Midas Formula. But the documentary didn't talk about the large operators on the opposing side that "work" on the formula and "profit" from it. What moves the market ? Retail operators ?
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I could show it to you... prove it to you, but I'm not.
However, I have some news for you. It might be ground-shaking, so perhaps you should sit down.
The earth isn't flat!
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Indicators can be simply described as mathematical formulas.
In math, if you attempted to solve the problem of calculating the area of a circle by using Pythagoras equation you would not succeed. Similary if you are attempting to apply an indicator in a situation or for a purpose it was not designed to work you will also fail.
If you want to learn to use an indicator properly you must either first design a system where the application of the indicator would be beneficial in reaching the systems objectives, or by reverse engineering the process by learning how and when the indicator was designed to fulfill its purpose and then choosing situations where it can be applied.
Either way, I recommend everyone who uses indicators to intimately study it, to the point you could even program it yourself if you wished.
In math, if you attempted to solve the problem of calculating the area of a circle by using Pythagoras equation you would not succeed. Similary if you are attempting to apply an indicator in a situation or for a purpose it was not designed to work you will also fail.
If you want to learn to use an indicator properly you must either first design a system where the application of the indicator would be beneficial in reaching the systems objectives, or by reverse engineering the process by learning how and when the indicator was designed to fulfill its purpose and then choosing situations where it can be applied.
Either way, I recommend everyone who uses indicators to intimately study it, to the point you could even program it yourself if you wished.
Murray Ruggiero
Sponsor
Finally someone who understands . There are two methodologies I am building here , first is creating a market model using the spectra. You are assuming the Quants found nothing but you don't really know what the Quants found, do you ?. If they found something they might not let anyone know or mix results with other things to hide it and use off short for private funds. There a lot of technical issues in doing this you need to address and correct for which I won't discuss here.
The second concept I am working on is what I call Spectral Regimes, We look at the patterns within the spectra and have a collection of strategies we switch between based on the spectral patterns. Creating these artificial signals give us a way of testing strategies against these regimes.
Another issue is what about combining these models with machine learning methods and/or Arima/Garch Hybrid models. This is still research, but promising and I am making what I am doing available to my customers , since I sell products to offset my research cost. I have 8 programmers working for me so I am selling product helps offset those expenses.
@Murray Ruggiero I watched your video and it looks like interesting research. What is not apparent from the video though is how I am going to use your regime filter to build actual trading systems and make money.
But Murray's a Vendor, so I wouldn't expect to be reading his secrets free of charge here any time soon.