How to select effective indicators for your strategyNot all indicators are useful: most are not, and some are downright misleading. Previous posts and studies, such as LuxAlgo's(1), determined that effective indicators need to: 1) produce data to support the trader's decision-making process, not substitute it with automated strategies, 2) produce non-redundant infos. But how do you select indicators in practice? Here, I share my own step-by-step process to select effective indicators for your strategy.
My approach is to use a two-stages process: 1) Expansion, 2) Contraction.
This is the same process that happens in our brains when they develop, first there is neuronal and synaptic expansion, creating lots of new connections that are not necessarily efficient, then there is contraction, which weeds out useless, redundant or ineffective connections. Here, the idea is similar.
## Expansion: try all the indicators you want ##
In the first stage, you just try any indicator that sounds like an interesting idea. The way you select the indicators is up to you, either it can be because it sounds like a good idea, or because it's in line with your main strategy (eg, a volatility indicator when your strategy is contrarian).
Whatever criteria you choose, you should:
1) Remain open to new types of indicators potentially outside your main field, as they can broaden your horizons,
2) Remain skeptic of any claims of effectiveness until you test the indicators and see tha they work for yourself (in the second stage: contraction),
3) Study the indicator to understand how it works and why it works. Don't just blindly use an indicator without knowing what it actually represents precisely, otherwise you will get bit by its limitations and false positives at some point in the future, likely when you will have a lot of money on the table to lose!
Once you have selected a set of indicators, or if you have reached the maximum number of indicators you can add in your TradingView plan (as it happens to me!), then you can go to the next step to weed indicators out.
## Contraction: drop everything that isn't directly useful to you##
In the second stage, we will extensively test the indicators for ourselves, on the assets we are interested in, and in others as well, to "field test" them and see if they work in our strategy. Indeed, trading and investment rely on a balance between collecting enough infos and keeping it simple enough (KISS principle(2)) to support our systematic decision-making process, without information overload which can produce decision paralysis.
The contraction/filtering process is more involved than the first stage, because you have to do the manual, dirty work of testing, it takes time, but this is the only way you can see whether the indicator work as intended and that they work for you. No two people will use the same indicator the same way as I explain in another post (3), so bear in mind that some indicators that may not work for someone else may work for you, and inversely an indicator that works for someone else's strategy may not for you, so the popularity of an indicator is no indication of effectiveness.
Here is a step-by-step outline of my process, feel free to add more steps depending on your needs:
1) Signal-to-Noise test: test on weekly and daily. If the indicator can't be reliable, can't produce good signals with low false positives and high true positives on these long timeframes that are much less noisy than shorter timeframes, then they are useless. Some people claim that there are indicators that work exclusively on lower timeframes, I am not trading such smaller timeframes although I can trade down to 15min, so your mileage may vary, but I remain yet to be convinced that this is true.
2) Redundancy test. If you already found a good indicator that works reasonably well for you, then compare any new indicator to this "best" indicator as a benchmark reference point. This will allow to weed out indicators that cannot provide new, non-redundant data. For example, in the chart of this post, I study correlations, which I compare against the signals generated by my RSI+ (alt) indicator which I consider one of my most reliable. Of course, the signal is of a different kind, but it still provides me a reference point as to whether the correlations can provide me with an additional edge or whether I should just stick to using only the RSI+ indicator. In practice, if the new indicator(s) can provide new, non redundant data, as shown by slightly different predictions in different scenarios or maybe a bit earlier, then great, I keep them. If not, for example the indicator does provide reliable info but it would lead me to take the same decisions at the same time, or worse, later than my best indicator, then I remove it.
3) Generalizabiliy test. Test on multiple markets, on mutiple timeframes, to check generalizability: if it doesn't generalize, the model is overfit on one target market's history, and this likely won't even work for the future if this same market, ie, this is an issue often encountered for models made specifically for bitcoin or ethereum.
4) Misleading test. Use bar replay, to check how the indicator behaves in realtime: does it sprout a lot of false positive in realtime, or is it as useful and predictive, or better, in real-time than when used for historical bars? Or worst being repainting indicators rewriting the past, such as pivots or zigzag, they look super accurate aposteriori but it's only because they cheat (see tradingview pinescript fage about that), using bar replay will help you detect them 100% of the time. Bar replay is one of the best tools you have to test indicators, don't underestimate it. Yes, it's time consuming, but it's well worth it, and you'll become quicker and quicker to use it over time with experience. For more information about the different types of repainting indicators, there is an excellent article in the PineScript documentation, it's worth reading even for non-coders(4).
5) Grouping and intra-class comparison. Finally, group indicators on the same study, so you can quickly answer a question eg about volume and volatility, or about market cycles, etc by checking the adequate chart. Otherwise, if you mix indicators between different charts, it will take you longer to analyze and compare the various signals. Also this allows to compare similar indicators between them to see if they really are useful, non-redundant. For example, in the chart above, it's a Correlations grouped study, so I added almost exclusively correlations indicators; while the delta-agnostic and (pearson) correlation coefficient both provide non-redundant infos, Spearman correlation and Kendall correlation indicators are redundant, although they shouldn't (they should capture non-linear relationships, whereas Pearson can only capture linear ones), their results aren't any different in practice with the pearson correlation coefficient in terms of significant signals they generate that would change my decision process, so we could drop two out of these three correlation coefficients, which would unclutter our chart without losing any data.
## Wrapping-up: continually refine your indicators ##
At the end of the day, it's important to continually try to adapt to the markets. Indicators can continue working, while others may fail, or in the end you find them too difficult to use in practice with your strategy. Your strategy may also evolve over time, and so your indicators should too. Don't ever feel attached to your indicators, you can revisit and question their utility at anytime, and you can go through the steps above again, and drop any indicator at anytime, even if they were useful before, what matters is whether they are still useful now.
There is also a next step for those who are open to learn programming: creating your own indicators. Not so much to create unique opportunities, although they might, but to better understand the market. You should view indicators as a way to better understand some facet of the market, indicators answer the specific questions their authors wanted to find an answer for. So by using indicators of other authors, you are reading the solutions to others questions. But you can also form your own questions, and then the next logical step is to develop your own indicators to find your own answers. And hopefully share them under open-source, so that we can all learn together (and this likely won't impact your profitability, to the contrary, as I explain elsewhere!(3)).
In summary, we can quote Bruce Lee, who described a very similar process for his mastery of martial arts as he taught his own named Jeet Kune Do:
"Absorb what is useful, reject what is useless, add what is essentially your own."
I hope this post was useful to you, and if you have an idea of a criterion or a step you use to select indicators that I didn't list above, please share it in the comments!
Enjoy, Trade Safely!
Tartigradia
(1): Technical indicators: what is useful and what isn't , by LuxAlgo
(2): en.wikipedia.org
(3): Why my indicators are open-source, and why yours should be too , by Tartigradia
(4): Repainting — Pine Script™ v5 User Manual v5 documentation
Indicators
BRIEFING Week #46 : Oh my FTX... But look at SPX !Here's your weekly update ! Brought to you each weekend with years of track-record history..
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Kindly,
Phil
THETAUSDTHello Dear friends
Currently, the price is in a long-term descending channel. The positive divergence of RSI has also been issued for us in the daily time frame.
But on the lower time frames, our resistance range is still in place and the upward trend has not been placed above the $1.296 range.
On the other hand, the upward trend line has broken down and the price range of $1.236 is on the way, which is an important area.
As a result, we expect to react to this range and form a corrective trend up to the area of $1.085 and $0.989.
We would be happy to hear your comments
AXSUSDTHi guys
We have a positive RSI divergence on the daily and hourly time frame, we have now reached an important support range!
If the price range of $7.64 is maintained, there is a high probability of breaking the downtrend line.
If the uptrend is above the $13.25 range, we will be issued a divergence confirmation.
What do you think?
The Graph GRT Crypto Market after the ElectionsMy forecast is that we will see a bearish outcome for the crypto market after the November 8th Elections, especially for The Graph GRT, which is overvalued.
GRT/USDT short
Entry Range: $0.09 - 0.10
Price Target 1: $0.08
Price Target 2: $0.06
Price Target 3: $0.05
Stop Loss: $0.115
Theory Of Visualization And Powerful Concept For Trader 🌆In today’s TradingView Post, I’m going to talk about the one Concept that Nobody Talk About and It Is Very Useful For Traders.
You see, very often traders are bent on making trading a Right or Wrong endeavor.
The moment they place their Trade, they do it with an expectation of Profit. Now, on this trade.
And that’s the Wrong Mental approach to have, that’s the Wrong mentality to adopt in this endeavor. Because the Market doesn’t work like that.
To Trading requires clear rules about the actual trade execution as well as with regards to the mental condition.
Both requires training which on the one side can be achieved through Screen Time And Focus however Visualisation one the other side represents an Effective Concept to further strengthen the own Abilities off the Screens.
In This Post we Investigates the Concept of Visualisation and Try Make it to the Topic For Trader.
ok let's go
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"THE THEORY OF VISUALISATION"
Brain Studies provide a Strong Scientific basis for How and Why Visualisation works.
In Some Neuropsychology Research reveal that Thoughts Create the Same Mental instructions as Actions.
Mental Visualisation has an impact on many Cognitive Processes in the Brain Confirming the Brain is getting trained for the actual Physical performance during the Visualisation in other words We Stimulate the Brain activity through Visualising the same way as when Actually performing the Action.
The Thalamus is the Responsible Part of Brain which serves this Unique role , ranging from relaying Sensory and Motor Signals , as well as regulation of Consciousness and alertness It makes no distinction between Inner and Outer realities, Therefore , any idea that is Visualised intensively enough will take on a semblance of reality in the brain - the actual belief becomes neurologically real and the brain responds accordingly.
This effect has specifically been visible when people Meditated intensively on a specific goal over an extended period of time.
The Brain begins relating to that Meditated idea as of it were reality . During the research, Neuroscientists discovered Two VERY FUNDAMENTAL Characteristics the Brain that Help Visualisation Work the way it does..
First : the Brain thinks in Pictures
Second : the Brain cannot distinguish whether something is just Imagination or actually Experienced.
( And There are people who believe that pain and illness are not real. They usually also believe that the universe is essentially a figment of our imagination. How we got imagination without having a brain escapes me, but think “The Matrix” without an underlying reality .)
Lets Back To The Topic...
Just Remember this.
Brain Think In a Image And Cannot Distinguish Whether is Real or Not..
THE BLUE-PRINT
It was noticed that Visualisation creates Neural Pathways in the Brain which act as a Blueprint to be Followed in the actual Physical Performance concluding while Visualising the brain creates the same neural pathways as actually doing it.
Psychologist Sian Leah Beilock of University of Chicago has done Research in this Area and considers Visualisation an important aspect for setting any goal since much the Unconscious Brain is build around a Visual Construction of the world.
Many studies have confirmed that Visualising the performance actually improves the Execution in the Real World.
Neural Connections are formed and the Strength of the Connections is directly proportional to the intensity of the Individual's Imagination feeling strengthens the Neural Connections.
Famous Actor Arnold Schwarzenegger have confirmed to use Visualisation techniques to cultivate a sense of belief , build confidence and create momentum to realise their ultimate goals.
" The more I focused in on this image and worked and grew, the more I saw it was real and possible for me to be like him .” -
Arnold Schwarzenegger
" It’s the same process I used in bodybuilding: What you do is create a vision of who you want to be — and then live that picture as if it were already true .” - Arnold Schwarzenegger
TRANSFERRING THE CONCEPT TO TRADING
Finally , transferring this concept to Trading , Screen Time can be extended to Visualisation Getting into a Meditative mode and Visualising your Trading Plan and Rules helps to better Internalise them getting a clear picture of what to look for.
Additionally , different Trading Scenarios can be visualised like the Perfect Trade Including the location and setup, Reversal and Breakout situations.
Also Scenarios where a Sense of Anxiousness is Experienced can be Recreated during the Visualisation to Train dealing with the Respective Emotions and be better prepared in live Situations.
When a Concept is Visualised over and over , the Brain begins to respond as the concept was real the Respective Neural Connections are formed.
Ideas for Visualisation can be taken directly from the recent experience or trade reviews for example providing a clear focus on what to visualise.
As a result , those Concepts begin to feel more obtainable and Real Motivating other parts of the take intentional action the Physical World...
CONCLUSION
The Brain not know whether your Visualisisation is real or not and Try to Visualize Sweet and Bitter moments Over and Over in Trading to Create a Respective Neural Connection to build Confidence ,etc That will helping you in Trading..
END..
*Thank For Reading Guys
no more words.
Just Wishing you Profitable Weeks!!
Regard Valerus
Source:
Bladerunner 2049 Movies
Wallstreet Journal
Uctrading
A Brainstorm on BTC price movement in OctoberHi
I remember seeing the 19.150 price a lot this month. So I drew a line and checked how the price of BTC moved in relation to 19.150.
It is interesting to see that here are 6 very profitable trades formed this price. 4 long trades and 2 short trades. All with very little stop loss.
I might just play around and update this idea if I find something interesting.
Thanks for checking!
PCC Ratio is looking BullishI have an alert for when the 10-day moving average falls below .8. The PCC spends most of its time between.8 and 1 when the 10 moving average falls below .8 you can count on a bearish reversal in the market. As of right now, we are above that with plenty of room. The reason why I bring this up now is that if we mid-term rally I'm looking for a strong bull push followed by a reversal before we trend. Setting an alert on the PCC for .8 and 1 crossovers will keep you on the right side of the market.
Will Bitcoin ever break above it's old trend line? #2 Hey fellow traders and Bitcoin enthusiast,
A month a go I made chart labeled "will bitcoin ever break above it's old trend line?' It was met with overwhelming response from the community as it was my most popularity chart. The charts focus was a look into the indicator "BTC Log Rainbow" coded by BullRider802. I wanted to look even deeper into this chart and indicator and see if there is any confluence to it with any other indicator.... Well I have found one.
"HTF Log Curves Oscillator" coded by quantadelic is the one on the bottom and it's showing the same exact thing. So we have to different Indicators coded by two different coders literally telling us the same thing! As we can clearly see the HTF was in a clear trading channel bitcoins entire existence and then show's a breach in 2020 as the other did, price action then shows a quick recovery to the eventual lack of hitting the top of the channel and the ultimate break though the bottom.
What does this mean? To me, first off, It means the math and coding used is sound. Both indicators separate from each other are reacting in the same way, and we might need to pay attention.
Why do we need to pay attention? The age old saying in investing is why, what was previous support is future resistance. These could very well show us the next bitcoin top and or bottom.
The one thing that is for sure is they are both either showing a slow down in bitcoins parabola or a consolidation period. That still remains to be seen.
Follow along with me and let's find out together.
I would like to thank everyone who has recently followed me, liked the chart and the Tradingview team for recognizing my work and helping this view get out. Once again the support and response has truly been overwhelming.
Thank you.
Please feel free to comment your thoughts or questions down below.
Remember, WeAreSat0shi
Stay blessed!
BRIEFING Week #45 : Still some Incertainty in the short-termHere's your weekly update ! Brought to you each weekend with years of track-record history..
Don't forget to hit the like/follow button if you feel like this post deserves it ;)
That's the best way to support me and help pushing this content to other users.
Kindly,
Phil
BRIEFING Week #44 : A new Path for the FED ?!Here's your weekly update ! Brought to you each weekend with years of track-record history..
Don't forget to hit the like/follow button if you feel like this post deserves it ;)
That's the best way to support me and help pushing this content to other users.
Kindly,
Phil
SUSHI/USDT 1H - Clean Long This Week 📈Really nice signals on the hourly SUSHI/USDT chart thanks to AlgoBuddy. Riding this midterm uptrend in crypto with BTC, ETH, and alts all moving to the upside. Still think this pump has room to run, however we're not swaying from our mid-November downturn expectations. We shall see! Cheers.
Session Indicator to Visualize Trends and ConfimationsUSD showing signs of weakness across all sessions.
New indicator I’m working in this chart will show and track session levels.
The dollar index is taking a break as focus shifts to earnings and the upcoming elections.
A much needed break from one of the parabolic uptrend events.
First was the Uber hawkish fed where Powell told everyone he believes in the milkshake theory.
One indication I have been monitoring recently is cliff drop that is TLT/JNK.
It recently bounced off a multi-year support going back to 2014.
If you haven’t been following the bull rally idea I put out a few weeks ago.
Check it out. I put 2 weeks worth of updates on Dealer positional Gamma, Delta, Volatility, Levels and macro.
To remain on target to 3900 by OCT 31 we’re going to want to stay within what I call the “JAM BANDS”
I will prepare an update on JHQDX before Friday with what my thoughts will be for the reset on Monday.
The JHQDX reset is not followed as much, but the Gamma is picking up as the expiration nears.
VIX coming down is going to give the daily moves an even bigger intra day move to end the month.
A pullback into the JAM Bands on daily should be expected.