Quality data manipulation & down loading software.[ Home ] [ Company Goals ] [ Data Downloader ] [Data Converter]
Solution # 3 - Trading Indicators that are proven effective in today's markets
Today's traders realize early in their trading careers that the canned indicators that charting vendors supply are for the most part useless. An indicator becomes useless when it looses its "edge". The degree that a indicator looses its "edge" is dependant upon how well it reflects the fundamental nature of price behavior and number of traders exploiting it. In order to become a consistently profitable trader the trader must be able to perceive and or do things that his fellow traders are unable to. Traders are limited to how they can obtain this edge, and the equipment/tools they can manipulate.
History of Trading Indicators:
In the VERY early years of trading and investing the hardware tools a trader could utilize were limited to how well we could draw and write pricing information on a piece of paper with his pen! What prevented the common man from becoming a great trader was not a lack of hardware, but rather a lack of software (the knowledge possessed by the professional trader).
Today the situation is much the same. The power of today's personal computer is unbelievable when compared to a main frame of several decades ago! Today's computer possess more computational power than a thousand bean counters and mathematicians of the early 1900's. The charting applications sold today all have indicators that when they were initialized conceptualized and implemented were "cutting edge" and very effective in seeing the underlying reality of the marketplace thereby creating profits for the creator. Yet, these same indicators are often ineffective today.
What happened? Easy, when the indicators were initially created and implemented only a handful of traders thoroughly understood the logic of the indicator or its math. Consequently these indicators often indicated high probability trades. However, as computer literate traders became more commonplace the effectiveness of these indicators began to diminish. Their effectiveness decreased in almost direct proportion to the number of traders looking at and using them.
More or less all traders when they begin their trading careers follow the same path.
So what is this truth? Simple, any indicator that is worth a damn was
designed by a trader in response to a burning need to solve a challenge. The
indicator is often created as a variation of a previously known indicator. This
newly designed/created indicator begins a life cycle all its own. The life cycle
The Reality of Commonly Available Indicators
There are countless indicators available today. The vast majority of them are available for free either as included indicators with charting applications, or in various trading forums. The majority of all indicators will occasionally work (this is why they are still included in charting apps., and why novice traders swear by them) i.e., they predict future price action occasionally. However, the vast majority will generate false signals the majority of the time. In order for a trader to profitably use a common indicator they must utilize it in a unique way thereby creating their unique edge. Unfortunately there are a zillion traders whom are using the same indicators and there are only so many variations on any one indicator. Consequently the probability that a novice trader will have a "unique perspective" is very remote.
Of the commonly known indicators that are still effective so some degree, the one thing they all have in common are that they reveal or work with a fundamental truth about price behavior. What are some of these indicators? Moving averages, momentum indicators, trend lines, Fibonacci ratios and retracements to name a few. Each of these work with a certain fundamental aspect of price behavior, so they will always be "somewhat effective".
Is this to say that one could make winning trades using these indicators by themselves? Yes, provided the trader had a unique perspective. Is this very likely? For the novice trader, absolutely not. For the professional trader yes, he could make winning trades off of just one of these indicators, Why? Because subconsciously he would be reading between the lines.
Could a novice trader create a winning strategy using just these indicators? Yes, again provided he had the right perspective. When these indicators were first released could of a novice trader made a lot of money? Yes, no doubt.
The bottom line is that the usefulness or profitability of any indicator (or system for that matter) is limited to the how effectively the logic and math of that indicator exploits a fundamental aspect and/or inefficiency in the marketplace, and the number of traders utilizing that indicator. As the price of a publicly available indicator increases the number of traders decrease logarithmic.
DataSharks is very happy to of entered into a relationship with John Hayden whom will be supplying DataSharks some of his personal trading indicators. Mr. Hayden has written two books about trading. The first one titled "The 21 Irrefutable Truths of Trading" was published by McGraw-Hill in the fall of 2000. His second book titled "The Complete RSI Book" is being published by Traders Press in the Spring of 2003. He has decided to begin releasing some of his indicators for a variety reasons.
DataSharks is looking for other documental professional traders whom would like to share their indicators with the public. Please email us.
|If you have comments, suggestions, or need help, contact public_support at DataSharks.biz|