What Is The Best Settings for TA indicators?

[Grey1]

I would like to explain about cycles first,,.. We believe market goes through cycles.. we believe in this because we are technicians,, The cycle in financial market is very similar to day/night cycle.. Our daily cycle is 24 hours ( amplitude) and our watch is our indicator.. So by using our watch we know exactly how far we are from the top (day ) or bottom ( night ) of our daily cycle...A cycle in market is however very difficult to measure and the first rocket scientist who finds a way of measuring the amplitude of the cycle mathematically be trillionaier in no time.. It is often said it is not possible to find an answer to the above dilemma..

Lets move on ..

Technical Indicators need to know the cycle's amplitude to be able to call the top and the bottom of the cycle and as a result one could buy low and sell high. But did not we say cycle could not be measured ? yes we did .. but we said it could not be measured mathematically , we did not say one could not measure by other means such as looking at the historical tops and bottoms and extend the empirical findings into the future..

I will expand later..

 

[stevespray]

Interesting thoughts. I've read a number of books written by people with theories on such matters. The most common theory I can find is that different sectors of stocks do well in different stages of the cycle. When I say well I mean in relation to the underlying markets. To overlay that theory onto your 'clock face theory' means that we would study which sectors do well at different times and place them at various points on a 24 hour clock. (I asume as you mentioned day and night that we are talking 24 hours instead of 12). I did have some notes on the subject that I dont have to hand, however if there is real interest in the subject then I could look them out. I remember that strength in 'new technology' was very late in the day, like 22:00 and strength in that group often preceed a sharp downturn, rather like March 2000 thru Oct 2003 I guess. If we could attribute certain sectors to the individual times throughout the day / night then we should be able to workout where we are on a cycle. It would appear that in order to do that alot of data would need to be gathered.

Steve.

 

[BBB]

Stevespray - thats another good example of cycle theory applied to sectors.

As a discretionary trader, I'm not a massive fan of price/momentum cycle theory myself, but am always open to ideas.

Volatility cycles however are useful and always worth appreciating - although I hardly ever hear it mentioned on this BB. I dont see how a price chart can be appreciated, or a trade managed without an understanding of current volatility. Maybe I'm biased due to my background in options?

 

[Grey1]

BBB, Steve,

A great contribution from two advanced traders.. It is great to see our traders have gone a long way to master the trading game..

We have a long way to go on debate of various issues such as volatility, Trend,time frames, oscillation ,statistical edge,and ...

We will expand on all these and will throw out all the non working abstract junks.. We are traders.. We need to be comfortable with our trades.. We must be confident in doing what we do..


I continue my post:--

During the 60's this guys called Joseph Hemingway started to study the market cycle hoping to capture the secret of market timing .. This was his final research conclusion on cycles

CYCLES do exist in market but the DOMINANT cycle shifts RANDOMLY across different time frames which makes a mathematical calculation of the cycle's amplitude an impossible task.. bad news hey


Lets move on to a better news

Failure of mathematicians to find the solutions resulted in practitioners using historical datas to find an empirical answer for market cycle..

The result was that market goes through 3 , 13 and 39 period.. In another word,, there is a cycle with in cycles with bigger cycle being 39 period ( if you are intra day trader you would have 3 minute , 13 minutes and finally 39 minutes and 3 days,13 days and 39 days for swing traders and so on )

As a result of the above research the technicians started applying the above figure to their indicators hoping they could gauge the top and bottom of the cycle.

TA indicators became very popular and technicians were the diva's of market analysis..

It did not take long for market traders starting to lose money again as the indicators failed to perform .#


Back to square one.. As a result of failure the complete TA went under the questions and all technicians became second class analysts.. This is still the case.

I will continue further .. I will explain how to avoid market cycles and all TA indicators to Trade for $$$

 

[BBB]

I find your last sentance a bit of a shocker! On most of your charts that you post, I see an MA of the CCI. Isn't that an indicator, or am I jumping the gun?

IMO, the more traders who learn to ditch indicators the better!

 

[Grey1]

BBB,

You are jumping the gun .. Please bear with me.. I use MACCI as a confirmation tool and not as primary entry/ exit system. I understand your concern though

Regards

 

[TheBramble]

I will continue further .. I will explain how to avoid market cycles and all TA indicators to Trade for $$$

Took my breath away as well...

Grey1 you mention the 3, 13 and 39 period cycles. There are also Elliot waves and a whole bunch of other (some fairly esoteric) cyclical indicators.

Some time back I took a look at Welles Wilders Delta System. It's interesting as far as this thread is concerned as it's based on (a) sector groupings and (b) cycles specific to each sector.

It doesn't use any specific TA indicators, just the sector cycles. Long, Mediu and short term with the possibility of a reversal of cycle toward the beginning/end transition point of each one.

Although I didn't have much success using this system, that may just have been due to my poor interpretation/execution.

I'll certainly be very interested in what comes next...

 

[Grey1]

Cycle,

Few years back John Ehler, the rocket scientist of stock market asked Wilder about the settings in his RSI ( he uses 14 as a default for his RSI .. That is 14 time frames back ).. The answer was.. 14 is the best number and when John asked him why , he came with no answer.. In fact he still does not have an answer..
( cut the story short john went to find an objective level for the TA settings and still working on it )..

The indicators settings be it MA or RSI or CCI or ... need to be dragged out from the cycle hidden in the chart to make these indicators useful as a PRIMARY tool..


This is not an easy task .. ( This is another story )

So as a trader what other tools we have at our disposal ?

Well we know we have the price, and volume at which these prices has been traded then by calculating the average price ( VWAP ) we have an indicator which is independent of any arbitrary setting which most TA indicators suffers from .

 

[options]

I've found that all these indicators work better when set to a longer period. I read somewhere that Wilder set the period at 14 as something to do with lunar cycles?

Currently the only indicator I am looking at is Kairi. And Only from the last couple of days. So far, pretty helpful. But 14 is too small and Joseph Hemingway's 39 too large. The other factor to consider is what time frame of chart.

 

[BBB]

I read the same book! 14 was chosen as it is half of 28 - the number of days in the lunar cycle.

Another useless bit of info from yours truly! (and Mr Wilder)