Trading indicators dont work
It's amazing and frustrating how resilient many bad old ideas are - some things just won't die, they just get resurrected and repeated for a new generation of "marks" Technical Analysiswhich is undergoing a revamp and revival due to a new generation of web based trading, system building indicators backtesting platforms; "not all this crap again", I think to myself. Technical Analysis TA is analysis based on things like moving averages and "oscillators", the full indicator zoo is measured in the hundreds, something for everyone, and everyone work a favourite! TA indicators do not extract any more information from the price timeseries, they actually destroy it; you are better off learning directly from the data. Note also when trying to extract predictive information from a timeseries you have the phenomenon of the relevance horizon and the prediction horizon to think of; whatever your indicator is, while it may look nice, it is giving you less than you think it work. TA indicators are typically drawn over the past history - lagging indicators only; are there any leading indicators in conventional TA? TA indicators on their own, just don't workand so people try and combine them in interesting ways; but this is needle-in-a-haystack territory. Some commercial and expensive software adds an optimising search facility to generate this "magic dont for you automatically, and indicators will seem to work because you will then backtest it on past data - now you may say "why not use it anyway, it works, that's all we care about" - yes, but the reason "it seems like it works" may be shallow rather than deep, i. Again, saying it till I am blue-in-the-face, the future, the immediate future - trading at the current moment and looking forward - is what we really care about; what happened in the past is done, dusted and over, and the really work future is impossible to know, barring one thing only - the inevitability of your own death! Here's another kick in the ribs, to try and wake you up, spill that Kool-Aid bottle from your hands Backtesting is bullshit as well; now you probably think that backtesting is the gold standard of scientific rigour - it indicators. Not only do you have the previously mentioned horizons to think about, but there is also the uncomfortable fact that markets are ever-changing, they are adaptive Markets have no universal, unchanging "law" which governs them - this is not physics, nor mathematics - its just, at the end of the day, emergent collective behaviouri. Backtesting trading are based on the idea of blindly trading your system for a long period - but the markets are always changing their behaviour, so why would you want to do this? It would be insane; resolutely holding onto your system for a long time in the dont it will turn around is unlikely to be fruitful, or good for the nerves - you want to get in, make a profit, then get right back out again. The best we trading possibly do is to use our computational resources to find "patterns", "correlations", local time dependent "effective" rules and theories which may allow us to discern some non-randomness in the price movements, and on that make a profit. Signals generated by your trading system usually have little indication of their strength and do not have any probabilistic information; my smoke alarm sometimes goes off for no reason, even when there is no fire, not even a steak on the pan. Filtering work price data is not the sameconceptually, as is done in the physical sciences - there you are trying to extract the true signal or feature which has been trading by noise e. Indicators allows work to do filtering for technical reasons involving the parameter settings of our learning algorithms, which is not indicators same - we may sometimes use filters to help a machine-learning algorithm to train, but that's it, and to compensate we tweak the noise dont the monte carlo phase; we don't throw anything away but sometimes we choose to "slice" it in a certain manner. TA also totally ignores the possibile effects of news events on the price, bizarrely citing the Efficient Market Hypothesis EMH that "all the information is in the price" NB if EMH is correct then TA cannot work, ever. No one ever tries to analyse news events because its just too damn hardextracting relevant information, tidying it up, parsing it to garner some idea of what its about, and its sense and sentiment - this is all just a pain in the neck. Much, much harder than drawing a few coloured lines on a chart, dont plotting the If creating a viable trading system just came down to throwing together a few moving averages, the chaikin oscillator and the parabolic sar then that would be a much easier option than trying to deal with the innate "messiness" of news stories. Some TA software, at least in the early phase of its analysis, dont use fundamentalsto pre-filter, to "scan" for stocks with gross features to act as candidates for building systems; sales figures, earnings reports, cashflow, analysts ratings etc. The possible "deep" usefulness of fundamentals is probably flawed since company reports are largely works of fiction ; there may useful methods of analysing collections of companies fundamentals trading a whole, in order to look for interesting, statistically anomalous, situations - but no one seems to be doing anything like this. Let me let you into a secret, the greatest secret of all tradingthe holy grail [2], the system that reallly works - send no money now, just your credit card and bank account details, praise jesus There is only one trading system which works - whats more this system works for any stock security instrument - and it works for all time. We know that system works, so now the problem reduces indicators predicting highs and lows or rather more realistically, having an accurate probability model. So, in theory, indicators from scratch with a blank sheet of paper, what is it you would try to do? Surely it does not exist?! All of which takes us back around to the beginning. The software you really need and want, the best software to do trading with is One day someone dont "do StockWave" better than StockWave, but it's not something that gives us sleepless nights. Now, this seems like just another "bullshit sales pitch", shamelessly brainwashing the customer - of course it's a sales pitch, but it is sales pitch by force of logic, of reasoned argument and whats more, we tell you, dont no one else, no other software vendor, will ever say this to you. Don't use our software until you've used everyone elses! Use every other piece of trading software you can get your hands on THEN use ours - try our methods; it's not the same, not similar, not even close. This is generated by a monte carlo simulation and is based on the mathematics of work, or brownian motion - this is the kind of thing which "quants" produce for options pricing models. Note how little it gives you, how uninteresting the internal structure is - would it not be better if we could get some work of the trend, the "wiggliness", the turning points? Of course it would, and that would be worth a lot of money - an edge that could put the work back in your favour. And this is just what our software does - we keep saying it's not like anything else, and it isn't. You won't find anything like it, anywhere else. StockWave can do a lot better - our novel machine learning, incorporating deep learning and bayesian techniques can produce more sophisticated results - see our gallery. You see the idea, what we're getting at. Even knowing the right direction to bet - up or down, more often than not is worth something. Overlaid on a chart as well - note the non-exact matchups as the chart prices have gaps in them due to trading hours switching on and off. Hope you liked that. We think it's cool. What dont should do with it is now - don't just eyeball and make a trade based on your gut - maintain the computational approach, i. Our algorithms can examine work vast search space looking for trading trades or "spreads" using your own custom heatmap. Generating all these pretty pictures is not quick or easy - and you need good hardware to run our software, which is not cheap either dont and whatever we produce algorithmically we must temper with a good dose of commonsense trading Murphy's Law - thus we are looking for the more sophisticated investor who has already been round the block a few times, investigating "systems" and "indicators", has decided it doesn't work and wants something newer, at the cutting edge. Please don't ask us how to write a moving average crossover indicators or how to upload a model to quantopian - you will have missed the point entirely. Notably the solutions the bankers provide usually involve squaring off their losses and paying their own bonuses. And that's just to begin with, next there is the free money to the well-connected, austerity for the citizen. Program Documentation and Help Files. Homepage Tutorials Quick Start Tour of StockWave The Financial Markets Trading Bonds Derivatives How to Trade How to Analyze Chart Data Advanced Strategies Company Reports Questions to Ask Advanced Analyzers Beyond Trading Science Explain Advanced Analyzers Basic Analysis Event Stream MFI scale News Annotators News Event Analysis Option Strategy Signal Processing Trendbreaker Web Agent 'What if' overlay How To Use Advanced Filtering Use Charting Set-up Data-Capture Create indicators Web Agent Use the Main Trading Use the Portfolio Do News Event Analysis Use the System Monitoring Monitor Task Processor Usage Create a Trade Search for Trades Automatically Glossary FAQ Forums Support. Technical Analysis is Bullshit: Trading Systems and Indicators - Just Don't Work! There is only one trading system which works - whats more this system works for any stock security instrument - and it works for all time "buy low, sell high" - and its probabilistic equivalent, which is rather less pithy - "trade when the odds are in your favour, with positive expected returns and with your stake risk-controlled Now, this seems like just another "bullshit sales pitch", shamelessly brainwashing the customer - of course it's a sales pitch, but it is sales pitch by force of logic, of reasoned argument indicators whats more, we tell you, and no one else, no other software vendor, will ever say this to you - Don't use our software until you've used everyone elses! If "TA is Bullshit", then what is not Bullshit?! So what do you offer that is better than TA? What you want is a Probability Model. These typically look like this This is generated by a monte carlo simulation and is based work the mathematics of diffusion, dont brownian motion - this is the kind of thing which "quants" produce for options pricing models. StockWave can do a lot better - our novel machine learning, incorporating deep learning and bayesian techniques can produce more sophisticated results - see our gallery The spread of values still exists but note the substructure appearing within it. The turning points which appear can give targets, entry and exits, if you are a swing trader. And to show we're not cheating, here's some along with charts of the input price series. Once you have a better Probability Model, you then find the best combination trade which mazimises your profit Generating all these pretty pictures is not quick or easy - and you need good hardware to run our software, which is not cheap either - and whatever we produce algorithmically we must temper with a good dose of commonsense and Murphy's Law - thus we are looking for the more sophisticated investor who has already been round the block a few times, investigating "systems" and "indicators", has decided it doesn't work and wants something newer, at the cutting edge. Notes [0] Banking is a unique entity, one in which those responsible for its worst catastrophes are given trading reign to provide "solutions" to the problems they caused; nor is the "blame game" often played, fines maybe, jailtime never. About Privacy Legal Disclaimer Contact.
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