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Dans un courrier daté du 19/10/98 20:10:11é Pari11 Madrid, magnus@xxxxxxxxxxx
a écrit :
> I do think that certain indicators work but only in a selective sense of the
> word. The Ehlers cycle indicators does "predict" tops and bottoms but only
> in a trading range. Once we break out of the trading range, the last signal
> taken would be in opposite direction of the trend.
>
This is the prefect example that you can take.
The cycle indicator (phase) do work when cycles are present in the market.
Not only when in a trading range.
But again, we can speak of predictivity of an indicator with some words of
caution.
An indicator will be predictive ( or at least give a correct answer with a
zero lag) ONLY when it is used in the range of its competence.
Is an indicator predictive or not ?
One cannot answer to this question without defining the working range
conditions.
The perfect indicator cannot exist because it should be able to answer to the
dual question:
trend vs trading range
or
cycle mode vs trend mode
or
noisy data vs clean data
or
winning equity curve vs losing
or...
uptrend vs downtrend
or
None of these question can be answered atvany time without paying the price,
and the price is lag.
Not lag in the indicator itself, but lag observed when changing from one state
to another.
When observing a uptend to downtrend mode, you need at least one bar: This is
the price of the lag (minimum price).
Verify by yourself for all the above list that summary the problems that are
to be solved to the trader: He is enforced to answer to one of the above
questions.
Even if he does not use any indicator at all...
Pelople are confusing the lag due to smoothing techniques and the lag due to
the phase change.
The first one is not dramatic, if it helps to solve the second one, that
cannot be removed. Only minimized.
Considering the phase indicator, it also works with trending data if a
cyclical component exist.
One may in this case displace the phase signal according to the trend slope
(I simplify).
The only case where the phase indicator does not work is in a long term clean
trend ( longer that the window size used to measure the main period.
But in itself, its an information!
Sincerely,
Pierre Orphelin
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