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Dans un courrier daté du 08/10/98 20:30:14 , vous avez écrit :
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Hi Gabe and anyone else who is into indicators...
Before you get too excited about 'understanding' indicators, let us be quite
clear that all indicators lag price. All indicators lag price. Write that
on your wall!
>>
All indicators lag is maybe true for most of them, but th lag is the price to
pay
to remove the noise from reading the tape.
This is not always true for some of them under some circumstances (du to an
artefact related to the size of the measuring window vs the intrinsic period
of the raw data. To make things clear, it could be the case for indicators
like ROC or momentum).
This it not true at all with cycle indicators when the spectrum shows a clear
cyclic behaviour.
Your point is not from a systematic system trader, and it's not a proof that
you will not succeed by using it.
<<
If you day trade, you don't need indicators because the price action tells
you precisely what is going on. There are various tools (not indicators)
which can help you establish the position of the market at a precise moment
that the price action is telling you what it is doing. It is the various
factors of support and resistance that you assess in relation to price
action, which tells you what to do. In short, it is called reading the
tape.
>>
See above.
I'm not a tape reader.
<<
If you position trade and use indicators, then you are using a tool that
lags the market, therefore, you have to have a bank account that will
accommodate the draw downs you have to suffer. This is not to say the
indicators don't give you the indication you are seeking, but it is going to
cost you dearly on many occasions. It will give you super returns, by the
same token. The BUT, is that you have to have a bank account of decent, if
not obscene, amount to withstand the drawdowns.
>>
No.
We do not speak of the same thing.
A sytem based on indicators that wins with huge drawdowns is not a system.
It's a mistake, and becomes a fatal error if you play it with real money
Writing an indicator that removes the noise without any lag is impossible.
Even one of the best tool available (Jurik's AMA, VEL) have some lag, but less
than the classical version of the considered indicators).
You can devise filters that are more efficient than others but all will show
lag, some less than others.
The quality could be evaluated by some measurement of signal/ noise ratio
compared with the lag.
My point was not on the lag.
I can live with it , because the smartest way to remove some the lag from the
trading system results is obtained by
combining the lagging indicators is a very sophisticated way where the raw
effect of the lag (that you can observe in a simple system using indicators)
is diluted into the complexity of the rules that the software establishes (
this is a qualitative explanation).
Sincerely,
Pierre Orphelin
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