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Steve,
I think you are correct. I do not know how to use indicators. I have
yet to figure out when a market will trend and when it will chop
(without considering other fundamentals). The question I always have
to ask myself is, "When do I switch from one system to another"? Even
adaptive systems have parameters that can change with market behavior.
How do you make these decisions?
1) When to switch from one system to another?
- Number of losers?
- Drawdown?
- Change in fundamentals?
- Other?
2) When do you decide to re-optimize your systems?
- Number of losers?
- Drawdown?
- Change in fundamentals?
- Other?
3) What is your samplesize for backtesting? How many bars/trades
do you consider to be a statistically valid sample to make your
decision that a trading indicator is valid?
Everyone can approach the problem differently. My method is to use
extremely simple indicators, consider volatility, adjust stops as
the trade progresses, change the size of the bet as the trade
progresses, and judiciously compound the money (as Einstein said the
most powerful force in the universe). These are my "indicators".
You can only trade on what you believe. In the long run I believe
that markets are unpredictable (and just when you think you have
done it you will be proven wrong). Given this assumption I prefer
to spend more time optimizing how I manage the trade rather than
tweaking an indicator. Am I saying that one should not look at better
methods to trade? Of course not. I would love to improve upon my
winning %. In that spirit I look forward to your insights. This
may prove to be a good thread.
Regards,
Tim
Steve Karnish wrote:
>
> Nicholas,
>
> Instead of asking someone who doesn't have any confidence in indicators and
> believes:
>
> "traders spend much too much time creating indicators. None of these
> indicators in the long run will give you more than a 50:50 chance at making
> money."
>
> Shouldn't you concentrate on traders that have had success with indicators
> and ask the them what they are using? Generalizations, like the above
> quote, are often, rationalizations for individuals that are incapable of
> applying indicators properly.
>
> Steve Karnish
> CCT
>
> ----------
> > From: Nicholas Kormanik <nkormanik@xxxxxxxxxx>
> > To: metastock@xxxxxxxxxxxxx
> > Subject: Some indicators should work....
> > Date: Friday, April 23, 1999 8:11 AM
> >
> > "traders spend much too much time creating indicators. None of these
> > indicators in the long run will give you more than a 50:50 chance at
> making
> > money."
> >
> > I find it hard to believe that various indicators don't perform better
> than
> > others. Take the MACD, for instance. I think it would yield greater
> than a
> > zero return over time, if used properly.
> >
> > Haven't you found *some* indicators that you have developed confidence
> in?
> >
> > Thanks,
> > Nicholas
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