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realtraders@xxxxxxxxxxxxxx
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I am re-sending this message at the risk of annoying any RTs out there who
have already seen it but unfortunately I have not seen it appear on the
forum nor have I received any comments or feedback.....maybe if any were
posted then someone might be kind enough to post them to me privately rather
than annoy other users with the duplication.
Many thanks.
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realtraders@xxxxxxxxxxxxxx
Bill Eykyn sent thru a great post about his views on indicators and their
perceived value compared to the actual price.
I feel that this post may have been written slightly "tongue-in-cheek" after
seeing quite a few postings from RT's who believe wholeheartedly in using
indicators as part of their mechanical trading systems...I am one of
those.....
Bill wanted to provoke thought so these are mine...
IMHO he is completely correct when he says "Except for price action, don't
all indicators lag ?" but just because indicators lag does not mean that
they are not valuable tools in the technical arsenal. I would suggest that
many profitable moves can be "predicted" by synergising certain lagging
indicators with price-pattern analysis and that by using price action
exclusively these moves will not be caught (with the same degree of
reliability).
In my experience these lagging indicators (when used with price-pattern
analysis) will give highly reliable signals over all time-frames...and I
think that one-minute data can be used just as you can monthly data...at
least in the FX markets.
Maybe I am wrong in this observation but I feel that every large &
significant move is accompanied by an upward shift in momentum (relative to
the zero-line) so I am wondering how does price activity alone gives
information on the momentum in the market.
I personally use an empirical sort of momentum measure by counting time
versus price in the last up/downmove and then comparing to the the current
down/upmove of price v. time (but this is really a simplified momentum
INDICATOR which is easily derived from observation of price).
In Bill's approach, it is price analysis at the beginning (the set-up) and
price analysis at the end (the entry or exit) but at least for me I prefer
lagging indicators as the set-up and price-pattern analysis at the end (the
entry or exit) thereby protecting one from foolish forays into the market
based on the lack of fine-tuning inherent with lagging indicators....maybe
I've shot myself in the foot with that last comment !
In these cash FX markets which I watch there is no real-time Open Interest
or Volume to use as confirmation, but you can't beat price pattern
recognition for stop-loss placement in particularl......maybe that brings up
another eternal question...the question being should we use the same
criteria for entry as for exit or is it preferable that they be different.
I think I'll leave that as more food for thought.
Conceptually, it's all interesting stuff... I hope you agree.
Regards,
Tom Nagle
Tullett & Tokyo Forex International,
Cable House,
54-62 New Broad Street,
London EC2M 1JJ.
Tel: +44 171 827 3409
www.tullett.com
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