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The sky IS blue.
But I've seen problems with the transition from sideways to trending
patterns. The issue I have is the inefficiency of a trading system during
this transition; as with the S&P from '94 into '95.
For instance, to keep it simple, Bollinger bands might work well in a
sideways pattern, while a moving average might work OK in an uptrend. It
is the transition which causes problems.
I've tried using volume indicators to determine this transition, but they
also seem to lag. Also other indicators which are supposed to determine
trend. The problem being that a trend is not a trend until a certain
amount of time has passed, meanwhile your system is on an OUT and still
following the previous pattern as with the S&P into '95.
I am developing an interest in divergences between an indicator and an EMA
of the close that might not lag so much. Also log based indicators like
TRIX. Anyone with experience in this area?
The other issues were poorly explained. I was trying to determine the
average overall methodology used for designing a trading system. You could
totally "channel" the price series with some rules written out in Metastock
code as I've tried to do OR you could also have a set of "verbal" rules not
written in code, but found by observing various indicators. Which is the
more typical method used? Or is a combination usually used?
In many cases, when using Metastock, I've found that writing specific code
to describe suspected "realities" can be difficult, though if you succeed,
you can then optimize. Also, I usually try to design most formulas so that
the greatest range of possible values or relationships between indicators
can be optimized, in order to let the computer do some of the work. Problem
here is that you have to see or suspect something before you can describe
it. Also you can't reference 2 price series in the same system test that I
know of.
Any ideas or thoughts on these great matters?
At 10:23 PM 1/12/98 -0800, you wrote:
>Rick Roegner wrote:
>>
>> I've noticed that whenever I design & optimize a trading system (or the
>> same for an indicator) in Metastock, that in various areas over the data
>> history, the system or indicator does not work so well.
>>
>> Has anyone devised a method to adjust a system or indicator over the price
>> history during these "weak" spots; let alone possibly into the future price
>> history?
>
>I've found that it takes different kinds of systems to be profitable in
>different kinds of markets. You might want one for strong up trending
>periods, another for range trading and maybe another for down trending.
>
>Depends on what works for you. IMHO
>
>Regards... John
>
>
R. Roegner
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