Data_Miner
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You'll understand why indicators don't work very well if you step back and look at what they are and that is a way to reduce the complexity in the market so it can be graphed in a two dimensional matrix: X and Y coordinates. All are designed so anyone with a high school education can understand the concept in about 2 minutes. Now what's wrong with this? The market is a complex entity. If it were so simple that an indicator could capture its essence and dynamics then everyone would make a mint.... just add a few dozen more indicators than the next guy to your trade strategy and instant success.
So the concept is at fault: Complexity reduction, the reduction of information in the market so you can trade by looking at 6 cute colored lines on your computer screen. This is a sort of open secret.
The folks that sell you the nice software for calculating and graphing hundreds of pretty indicators won't tell you this, but why do you think they market trading software as opposed to using it themselves to trade the market. They know that their product doesn't make money in the market, so they sell it.
If it did they wouldn’t bother with marketing, tech support and customer service but just use it to trade and make money directly.
So what to do? What can handle complexity? The general term is soft computing. This includes Neural Networks, Genetic Computing, SOM, Fuzzy Logic and a host of other disciplines.
You might want to read the book called "The Predictors". It details how 6 grad students used such computing systems to trade. They started in the basement of a rented house and in a few years sold out to UBS for $500,000,000. They didn't use ADX, MACD or Bollinger Bands!!!
If you decide to go this route get industrial grade software for soft computing. Avoid the “toy” programs marketed to traders like NeuroShell. They are junk. Your software acquisition budget will be in the $20,000 to $50,000 range. That’s the route I went and haven’t had a weekly net loss in years nor do I use a single indicator.
So the concept is at fault: Complexity reduction, the reduction of information in the market so you can trade by looking at 6 cute colored lines on your computer screen. This is a sort of open secret.
The folks that sell you the nice software for calculating and graphing hundreds of pretty indicators won't tell you this, but why do you think they market trading software as opposed to using it themselves to trade the market. They know that their product doesn't make money in the market, so they sell it.
If it did they wouldn’t bother with marketing, tech support and customer service but just use it to trade and make money directly.
So what to do? What can handle complexity? The general term is soft computing. This includes Neural Networks, Genetic Computing, SOM, Fuzzy Logic and a host of other disciplines.
You might want to read the book called "The Predictors". It details how 6 grad students used such computing systems to trade. They started in the basement of a rented house and in a few years sold out to UBS for $500,000,000. They didn't use ADX, MACD or Bollinger Bands!!!
If you decide to go this route get industrial grade software for soft computing. Avoid the “toy” programs marketed to traders like NeuroShell. They are junk. Your software acquisition budget will be in the $20,000 to $50,000 range. That’s the route I went and haven’t had a weekly net loss in years nor do I use a single indicator.