Article Predictive Indicators

[T2W Bot]

Everyone knows the market data are fractal.  You can look at a chart of daily data, look at a chart of weekly data, and the charts basically look the same if the scales are removed.  In other words, the amplitude of the cyclic swings scale in direct proportion to the cycle period.  I call this effect Spectral Dilation because longer cycle periods have larger swings.  The Hurst Coefficient is directly related to the degree of dilation.  Fibonccians use the Golden Spiral to show the dilation factor is 1.618.  The exact degree of dilation is not important.  The fact that dilation exists is beyond question.  So, in round numbers, the spectrum amplitude increases 6 dB per octave of cycle period.  This “1/F” phenomena seems to be almost universal in physical systems.
Here was my epiphany regarding market data:  Like everyone, I knew the market data was fractal.  However I completely disregarded this fact when looking at oscillator type indicators such as the Momentum, Stochastic, RSI...

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[timsk]

"A basic principle of filtering is that simple differencing has an attenuation rolloff of 6 dB per octave per order of the filter in the attenuation band of the filter."

I'm sure Mr. Ehlers knows what he's talking about - but does anyone else? I gave up reading the article when I got to the second paragragh and read the sentence quoted. Double dutch to me!
Tim.

 

[Trader333]

Well it is an advanced article and technical in nature but it all made sense to me so I am guessing that your education must be "sadly lacking"

 

[timsk]

Well it is an advanced article and technical in nature but it all made sense to me so I am guessing that your education must be "sadly lacking"

Hi Paul,
Yes, I'm sure you're right about my education! If you understand what he's on about - then that's good enough for me.
Tim.

 

[Splitlink]

I'd like to say that I understood this article, but I did not.

 

[Splitlink]

I wrote the above post without reading the previous ones. Now that I have, thank God that I'm in good company!

I always thought that Paul was a cut above the rest of us mere mortals!

 

[Trader333]

I always thought that Paul was a cut above the rest of us mere mortals!

Not at all but I do have a reasonable understanding of complex concepts.

 

[Splitlink]

There you go again!

 

[tar]

Is he profitable ?

 

[valleyvintner]

Your comment poses a paradox. I strongly agree on some points and disagree just as strongly on others.

John Ehlers' very considerable reputation didn't come out of thin air. He has earned it by providing methodologies and software products that really work. His prominence in technical analysis is results-driven, by contrast with the marketing-driven profiles of many present day gurus.

On the other hand your view that one might make money by watching a market's supply-and-demand seems unpromising at best. Certainly we want to know "which way?" but what we really need to know is "when?" I'm curious about your "other data and instruments available to any trader with half a wit." If you refer to such traditional indicators as Relative Strength, Directional Movement, Williams %R and others that use arbitrary lookback periods I would advise looking elsewhere for something statistically valid that both avoids bad trades and indentifies promising ones. John Ehlers has developed and published several such statistics based tools that can be viewed on his website and in his articles, notably his application of the Hilbert Transform in identifying the current dominant cycle in any market and on any time frame. If you're unfamiliar with this aspect of his work one can understand your bafflement, but I'd urge you to explore his approach with a more open mind.

I think you err in saying, "...nothing as hard-wired as technical analysis will ever be able to automatically adapt, or therefore be useful, over any appreciable period of time." I completely agree with you if you refer to the traditional indicators that I mentioned earlier but I very much disagree with the notion that technical methods founded on the kind of applied science found in electronic signal analysis, for instance, have no value to the futures trader. First, technical analysis nowadays is anything but "hard wired" or inflexible. Second, few phenomena resemble market price movement more than signal behaviour.

Another ex-engineer who has created useful statistics based software is Cynthia Kase, author of "Trading With The Odds." The title speaks for itself. I believe it's long out of print but an ebook version exists and can be Googled. Her proprietary software suite, "StatWare," rewards attention also.

Again, I agree with you that no single technical indicator has all the answers. What is required is a realistic application of complementary tools driven by a top-down strategy that goes well beyond technical analysis. In my experience, for example, volatility is a core value while volume and open interest are all but useless.

With every good wish,
valleyvintner

 

[Sigma-D]

John Ehlers' very considerable reputation didn't come out of thin air. He has earned it by providing methodologies and software products that really work.

Do you have any empirical proof of that claim?

 

[valleyvintner]

John Ehlers

Do you have any empirical proof of that claim?

The comment is not a claim; it's an observation. Just look around. In particular, check out his history with TASC and Futures magazines. Many "gurus" would demand serious money for the sort of knowledge that Ehlers freely gives away.

If his work were not of value to stocks and futures traders, we wouldn't follow him in our thousands. But I do also caution against relying solely on a tool like the MESA Stochastic. Other methods - notably the Bollinger Bands ANOVA procedure - in combination with the engineering-based methods of Ehlers and Cynthia Kase - can produce a focused 3-D view of a developing swing.

 

[0007]

Another ex-engineer who has created useful statistics based software is Cynthia Kase, author of "Trading With The Odds."
With every good wish,
valleyvintner

Very interesting and useful links – thanks!

 

[Sigma-D]

The comment is not a claim; it's an observation. Just look around. In particular, check out his history with TASC and Futures magazines. Many "gurus" would demand serious money for the sort of knowledge that Ehlers freely gives away.

Look around? What the hell does that mean? I asked you for empirical proof that his methodologies and software products work.

He's just another pie-in-the-sky engineer that has so fallen in love with his discipline of choice, he imagines it gives him 'signs' in a totally unrelated discipline.

Seriously, if any of these 'gurus' had anything of specific worth to trading with their cycles and waves and harmonics and geometric shapes and other assorted voodoo, they'd have an undeniable and unmistakable hit with just about every trader looking to ply their trade. They don't. Each of them has far greater number of detractors showing where their methods don't work than those espousing the efficacy of the same.

I'll give you the test that all phantom prognosticators should be set for proving the magic potion of choice - show us how YOU will use Ehlers to trade any instrument of your choice going forward this week in real-time.

My guess is you'll find a way to tap dance around that one and disappear.

If his work were not of value to stocks and futures traders, we wouldn't follow him in our thousands. But I do also caution against relying solely on a tool like the MESA Stochastic. Other methods - notably the Bollinger Bands ANOVA procedure - in combination with the engineering-based methods of Ehlers and Cynthia Kase - can produce a focused 3-D view of a developing swing.

Follow him in your thousands? You know thousands of stocks & futures traders do you and they all use Ehlers. I substantially doubt that. As for Kase her company markets software which has a fairly poor reputation generally in the industry - probably because it's also based on a one-time, one-approach methodology that worked, for a while, back then, but has since been invalidated by the significant changes which the financial markets have experienced.

It is safe to say two things:-

1. Any methodology, system or process invented and proposed more than 5 years ago for trading the financial markets has a very high probability of being totally worthless today.

2. Any 'guru' marketing software, services, products and books on the strength of their past glories do not warrant our attention.

 

[davies]

Sigma -D

I think you have "hit it on the head" with your comments.

You are a very entertaining writer and after reading many of your comments - you are open to admit that you cannot find a way to make trading work for you .

Just out of interest - how long have you been trying ? - not just in approx years - but in actual total hours spent reading / learning / studying charts and actually taking trades in what ever instruments you have tried?

I wish you well and please keep me entertained as well

Thank you