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Strategies & Market Trends : TA Science Projects & Experimental Indicators -- Ignore unavailable to you. Want to Upgrade?

To: Galirayo who wrote (109)	4/12/1998 11:47:00 AM
From: ftth	Read Replies (1) \| Respond to of 237

Hi Ray, re:<< let's assume that Heavy Weight Long Term Buyers use Standard Indicators as well as the Short Term Groupies. Would an indicator or combination of indicators that found both simultaneously be beneficial?>> Sure, and I think I see where you're headed with this. Would you agree that the net result of this combined effect would be visible as a high volume breakout day with a large range that opened on (roughly) the low and closed on the high (due to both groups participating), then followed by continued strong (but not quite as strong) demand due to the heavyweights loading up over several days as they see confirmation of the breakout's staying power? (In other words, volume, volatility (both intraday high/low and day to day close), and momentum would all play a role in indicating or measuring this condition) re:<<And if you manage to create a completely "new and different" indicator ... will it not be but a short while before it (the new indicator) will meet the expectations of your original hypothesis of A Transient Indicator? >> By this do you mean that the "new and different" indicator would soon be followed by the masses? Re:<<If so then ... how can any indicator or combination of indicators be relied upon? Unless ..... it just so happens to be in Tune with a Transient Market at a given juncture.>> I think there's a lot of truth in that statement. Short term indicators (where most of the weight is given to the most recent 5 or so days) can only be expected to be predictive for the outlook of the next few days or so, with the highest probability on tomorrow's action, and decreasing reliability the further out we go. A new analysis has to be done at the end of each day to update the future expectations. In a lot of ways, it's analogous to a weather forecast: tomorrow's forecast is fairly reliable, but still can on occasion be completely wrong; the 3 day forecast is less reliable, especially during transitional parts of the year (season changes), and the 5 day forecast is a joke (except during the middle of the summer (bull market for heat:o)) when a 20-day forecast would be accurate). It may seem like a goofy analogy but there are a lot of similarities to the behavior of weather indicators and forecasts. So, it's virtually impossible to RELIABLY call the timing and extent of a breakout day from a base the day before it's going to happen. Since the trend is sideways (or trendless), the only measurements that may indicate an impending breakout relate to volume and price range/volatility. All other indicators are neutral because we're in a base. Still, many breakouts just happen out of the blue with no evidence from volume or range, so it seems a person either buys a tight base and waits (maybe forever), or we buy into the breakout strength. The question then becomes do we buy on the breakout day, the next day, the next day, etc. This is where the indicators have useful values: determining when and where an apparent breakout is buyable, and, just as important, determining when and where a breakout's followthru becomes questionable, and we bail. In other words, I'm claiming that trying to reliably measure and signal the conditions that happen IMMEDIATELY BEFORE a breakout and getting in before the breakout actually happens is a pretty low probability proposition. Waiting for an apparent breakout by simply watching price and volume, and then using the indicators to indicate the breakout "reliability" has better risk/reward (dollars per day in the stock), even though you miss the initial portion of the move. Plus, even if we buy the breakout "perfectly" we still haven't really achieved our result.we've only reached a milestone. We still need to SELL at the "proper place" to have a successful result (which is easier said than done). re:<<I still think that a Standard Indicator with modifications or a combination of modified indicators may yield the best result as long as that indicator or combination thereof is in Tune with the Market.>> I'd agree with that statement in general, but the "as long as" caveat is the part that I haven't been able to find (consistently) with any standard indicator, and is the main reason for my looking into "non-standard" indicators, especially the self-initializing, adaptive types because their response is based on the stocks own behavior, not an arbitrary parameter setting that worked well in a back test of all stocks. But, what SHOULD work and what DOES work are 2 different things. Do you have a set of standard indicators and settings that you currently use for every trade, or are you still in the "exploration" process? dh