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On the topic of similar indicators.
Indicators are simply transformations of underlying data sets that emphasize
certain aspects of the data and deemphasize others. To optimize, you
therefore need to use indicators that reference different data sets.
The primary data sets for stocks that I can think of are
- individual stock price
- individual stock volume
- individual stock derivative (options and futures) price and volume and
open interest
- related sector and market price and volume
- related sector and market derivative price and volume and open interest
- sentiment data (surveys, book covers, social mood etc.)
- portfolio data (position size, portfolio level risk statistics etc.)
(You can argue about whether volatility is its own data set, but from first
principles it is a derivative of price.)
All indicators use one or more of these underlying data sets. If you are
going to limit the number of indicators you use, then try to make sure that
you are using indicators from several different underlying data sets. But
remember that price is primary.
If you want to see how a top level Technical analyst puts all this together,
then look at the Roth chapter in "Technically Speaking" by Chris Wilkinson.
Andrew
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