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The ADX is so so like all indicators.
When the market is going up 55% to 80% of all stocks are rising. If a
random number generator were used to pick stocks for your portfolio,
the number of winners in your portfolio should match the overall
percentage of stocks that have risen since the portfolio was picked.
Well, you don't like random number generators. You can not handle the
psychological aspects of picking stocks randomly. It just doesn't make
sense to you that it could work.
So you develop a trading system using the ADX, or any other indicator
or combination of indicators. Wow, it beats buy and hold. Really.
Here are a few questions to ask.
During what kind of markets does it beat buy and hold. Downtrends?
Uptrends? No trends?
Is the system going to destroy your peace and sanity when it starts
it's huge drawdowns like it would have in 2001 and 2002
Does it pick more winners than a random number system would? Does it
make more profit than a random number system?
In what kinds of markets does it beat a random number system, if it
does at all.
How does it do on a yearly basis over long periods of time. Forget the
overall performance. How many times out of the last X years would you
have quit trading it because you couldn't stand to lose like that.
Now do any of the books, articles and websites touting the ADX or any
other indicator answer those questions. NO! Why not!
Well, here is their answer.
This fabulous indicator was developed by one of the world's greatest
traders and chart analyzers. It doesn't need to be tested because if
it comes from our guru, you know it's good just because he said it
was. He's written countless books and given lectures all over the
world. Forget the test results, you have our fabulous guru's word for it.
Yeah, but I would still like to have my quesions answered.
Okay, here's out answer. Since everyone uses indicators differently;
everyone has different trading skills; everyone trades a different
market, test results would be meaningless, so we just don't publish
them. Even if we did, no one would believe how good this is and how
rich it has made our famous guru. Don't you want to be rich?
Here's my answer.
Show me one system with the ADX, or any other indicator or combination
of indicators, that has beaten buy and hold, is consistent year to
year, beats a random number system and has rational drawdowns. Show me
just one. Put a disclaimer on it telling me the blah, blah, blah and
I'll test it myself. If it does all those things, then I'm going to
take a serious look at the indicator that did all of that.
I'm going to read all of your guru's books and kiss your guru's ass.
Then I'll find ways to incorporate this indicator into my style of
trading, and I'll develop a system that suits me now that you've shown
me an indicator, or trading logic, that I can use as the base for my
own strategy.
Don't take my word for it. Do the tests I've suggested with the ADX in
any combination you choose and get back to me with the results.
It's fairly easy to beat buy and hold. It's very difficult to achieve
consistency and to beat a random number trading system in a specific
market.
Super
--- In equismetastock@xxxxxxxxxxxxxxx, "Paul Harris" <paul_vicmar@xxx>
wrote:
>
> Have recently been looking at Wilders Directional movement system and
> reading about it on the web.
> What are people´s experience using this sytem? How effective is it in
> identifying trends etc...
>
> http://www.surefire-trading.com/tsl/tl/tl-71.html - ADX and RSI
> http://www.renegadetrader.com/ - Choosing stocks
>
> Thanxs in advance
>
> PAUL
>
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