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Sursod,
Looks like I can't copyright and sell *my* theory afterall.
You've given away the equivalent of one average trading text book in
a single forum email.
Thanks for sharing your hard won knowledge on RSI and cutting to the
chase on derived indicators.
You have vindicated my views on the value of the Ami community.
Salute,
Brian.
--- In amibroker@xxxxxxxxxxxxxxx, "sursod" <sursod@xxx> wrote:
>
> Elder warned against going too far out in "derivative of
derivative"
> indicators in his book "Trading for a Living", my main worry about
> these kinds of indicators is losing sight of correlation with price.
>
> I think whether double derivative indicators have more lag time
> depends on what indicator (normalized, bound, .... etc) and how we
> use it. Lag time can be beneficial when it screens out undesirable
> noise and synchronize well with other indicators, or it can be very
> bad if it makes us buy tops and sell bottoms. Either scenario can
> happen, sometimes seemingly at random.
>
> I will use RSI and SRSI to illustrate how derivative indicators can
> both be leading and lagging. RSI is similar to Lane's Stochastics
> except it does the smoothing before the formula calc giving it an
> angular chart pattern which I find easier to read. The formula that
> binds RSI also gives it a countertrend bias. At RSI==50 price moves
> RSI equally in either direction, the higher RSI is above 50 the
more
> the same price change will give bigger RSI fall than RSI rise, and
> the opposite is true for below 50. The shorter the RSI period the
> more pronounced the bias. After a sustained bull or bear run
putting
> RSI in it's outer limits the very first retrace will move RSI in a
> big way, making RSI breakout happen much sooner than price
breakout.
> Stochastics of RSI (SRSI) exaggerates this countertrend bias as it
> moves faster and becomes bound sooner. A system using SRSI crossing
> RSI, or SRSI==100 or 0 as benchmark for RSI breakout (SRSI goes to
> 100 or 0 when RSI makes new highs or lows within the SRSI period)
> can signal as fast as the first bar of price retrace.
>
> If the retrace is shallow and price continues up or down the same
> timely system can become the worst laggards. The double
countertrend
> bias has pushed SRSI to the opposite limit of 0 or 100 while RSI
> remains a good way above or below 50 on the opposite side of the 50
> divide and far from SRSI. A continuation price move will give small
> RSI steps and therefore small SRSI steps, small steps and big
> distance means SRSI will take a very long time to cross back in
line
> with price. How long depends on the details of price pattern, a
> function of how it zigs and zags and the size of each zig and zag.
> Pot luck.
>
> My observations are based on ER2 15 minute bars. Does the same hold
> true for other instruments and time frames? Yes and no, a lot
> depends on details of price patterns and price patterns when seen
as
> numbers can have close to infinite variations, not to mention the
> large permutation of indicator parameters.
>
> Brian wrote, "On the other hand, I do have a bee in my bonnet about
> the absolute rubbish that is put around about trading on the net."
> I think it's because anything and everything is both true and false
> all depending on context, anyone can get away with uttering
> anything. And the industry of Guru Speak is born, thrives and feeds
> many people.
>
> "On the other hand, I appreciate that it is *a cheap shot* to make
> contrary statements without any supportive argument. At some time
in
> the future, when I can do a proper job of it, I might lay out the
> arguments to support some of the statements I have made about stats
> and system design etc. and give the forum a chance to make their
> critique."
> Please do. BTW my remark about valuing the Pardo book does not mean
> I think you made unfair comments about it. Not at all.
>
> "If we standardise to binomial terms 63% wins is very good if we
are
> considering a coin toss (win value = loss value)."
> I think 63% win is phenonmenal, 50-50 coin toss is more the norm,
> but what do I know. The straw I grasp is at 35% win I need 1.9
AW/AL
> to break even, so I tell myself not to go below AW/AL of 2.
>
> Regards,
> Sursod
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@>
> wrote:
> >
> > Continuing.....(I had to go and change a light bulb).
> >
> >
> > My hypothesis that primary indicators (price, vol, OI) are more
> > accurate and have less lag than secondary or tertiary indicators
> that
> > are derived from them is informal and tentative at this stage.
> >
> > As far as I can tell it is original as I haven't seen any
> published
> > commentary use those definitions.
> > It's probably just a poor man's version of principles that are
> well
> > known in various academic disciplines.
> >
> > It's there to be proven wrong.
> > Thanks for the two exceptions you provided.
> > I have made a note of them and will do a study on them at some
> stage.
> >
> > Re % wins and randomness:
> >
> > No wins/no losses is relative to %won/%lost.
> > If we standardise to binomial terms 63% wins is very good if we
> are
> > considering a coin toss (win value = loss value).
> >
> > Brian *:-)
> >
> > --- In amibroker@xxxxxxxxxxxxxxx, "sursod" <sursod@> wrote:
> > >
> > > Hi Brian,
> > > I enjoy your posts of ideas.
> > > I agree with you regarding derivative indicators although I use
> > > Stochastics (SRSI) and Bollinger Band of RSI, both derivative
of
> > > derivative of price. Personally I do not rate any TA indicator
> as
> > > better than 35-65% accurate and often randomness decides when.
> It
> > is
> > > more important to know the indicator we use so we understand
> when
> > it
> > > might fail then to chase newer and fancier indicators thinking
> > > computation sophistication equates the holy grail.
> > >
> > > I value Pardo's book on systems design very much but ultimately
> we
> > > have to make our own rules and write our own script, there is
no
> > > holy bible and no absolute truth except the inconvenient truth
> at
> > > the bottom line of the trading account.
> > > Sursod
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "brian.z123" <brian.z123@>
> > > wrote:
> > > >
> > > > Hello Bill,
> > > >
> > > >
> > > > I'm pleased you read the reply as I hadn't seen you around
for
> a
> > > > couple of days and thought you might have disappeared.
> > > >
> > > > Trialling (it's not in my dictionary either - I haven't been
> to
> > > > school for a while) = = trial and error (paper trading or
> virtual
> > > > trading where you visualise the outcomes of your systems in
> your
> > > > minds eye or imagination).
> > > >
> > > > I base this approach on my theory of success (template) = =
> theory
> > > > (reading?)followed by practice (backtesting?) followed by
> > > application
> > > > (trading or virtual trading) and then back to the drawing
> board
> > to
> > > > fix up your mistakes - the path to success is perpetual
> > > application
> > > > of the above cycle (continuous improvement in business terms).
> > > >
> > > > I discussed *The Success Template* in more detail in a
> previous
> > > topic
> > > > on Trading Psychology.
> > > > It was of minority interest only and some forum members
didn't
> > > like
> > > > it at all so it may not be to your taste either.
> > > >
> > > > Trading bank = = trading capital = = the amount of money you
> have
> > > to
> > > > trade with.
> > > > Depending on your definition of ruin i.e all of your capital
> is
> > > gone
> > > > or 50% of your capital is gone, once you trade to ruin it is
> game
> > > > over until you can put together another stash (by the way
ruin
> > > isn't
> > > > in my trading goals).
> > > >
> > > > I understand your point on AccDis.
> > > >
> > > > I am a liberal and free thinker.
> > > > As far as I am concerned feel free to speculate and use
> examples
> > > etc
> > > > in discussions.
> > > > There is no pressure on from me to be correct.
> > > > It is only a discussion.
> > > >
> > > > If you are going to write a book etc it is a different matter.
> > > >
> > > > Brian*:-)
> > > >
> > > > P.S
> > > >
> > > > I am not a training guru so feel free not to believe anything
> you
> > > > can't verify for yourself.
> > > > When in doubt put it in the holding pen.
> > > > If it doesn't stack up throw it in the rubbish bin.
> > > >
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, Bill Halliday
<halliday_mo@>
> > > > wrote:
> > > > >
> > > > > Brianzee123,
> > > > >
> > > > > Thank you for your response. I appreciate them very much.
> > > > >
> > > > >
> > > > > Am I on the right track?
> > > > >
> > > > > Definitely.
> > > > > It's a long way to the top though.
> > > > >
> > > > > Unquestionably true!
> > > > >
> > > > > Suggest improvements to your approach?
> > > > >
> > > > > Keep doing what you are doing (reading, thinking,
> > questioning,
> > > > > discussing, trialling; you are in good company with
> AmiBroker).
> > > > > It will be interesting to see what you can do in a few
years
> if
> > > you
> > > > > are still around.
> > > > >
> > > > > I will read, think, and question. Discussing my findings
> in
> > > this
> > > > > forum is the way I plan to verify/focus my approach.
> > > > > Trialling isn't in my dictionary, what is it?
> > > > >
> > > > > Suggest improvements to your system development?
> > > > >
> > > > > I would say to think carefully about the criteria you use
> to
> > > > evaluate
> > > > > your systems (there is discussion in Pardo about this-I
will
> > > read
> > > > it) and to
> > > > > understand the principles of money management thoroughly
> (there
> > > are
> > > > > 1000's of systems but you only have one trading bank).
> > > > >
> > > > > I'm not faminiar with the term: trading bank, what is it?
> > > > >
> > > > > My initial reason for starting the document was to learn
> what
> > > a
> > > > > system was composed of and how to put one into practice.
> > > > > It's a start!
> > > > >
> > > > > Soon I'll be up to the place where I can set realistic
> goals
> > > for
> > > > a system.
> > > > > As you point out, the Accumulation/Distribution System
> wasn't
> > > > intended
> > > > > to be used as a system, but was only used for the purpose
> of
> > > > learning
> > > > > to think/write/plan etc. in "Systems".
> > > > >
> > > > > Thank you for reviewing my approach and providing
comments
> on
> > > it.
> > > > >
> > > > > I look forward to your comments on my next offering.
> > > > >
> > > > > Bill
> > > > >
> > > > >
> > > > > ---------------------------------
> > > > > Have a burning question? Go to Yahoo! Answers and get
> answers
> > > from
> > > > real people who know.
> > > > >
> > > >
> > >
> >
>
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