Anyone actually developed and using their own, home made, indicators? Or is that the norm around here? From several posters here and over at MoneyTec I have gotten this impression that the more popular ("public") ones generally aren't profitable? (The "if it was so easy everyone would be doing it" rebuttal) Or perhaps common ones like MAs, Stochastics, Bollinger Bands...etc can be made profitables through correct position sizing, risk management and stop losses?
I use my own, "home made" as you say indicators. Enjoy, among the others, the most recent "Gear Box" http://groups.yahoo.com/group/amibroker/message/50999 As for the results, the formulas and the statistics are available to the public. I have no problem to post, the last two years, profitable ideas : The losers will steadily keep on loosing, else there would be no winners in this zero output game...
First of all, let me mention briefly that I have a problem with the word "home made". It is often used with a negative connotation, especially in the context of merchandise, when all it means is that it is made in someone's home, usually by the entrepreneur / inventor himself instead of in a factory, where morons trained by the inventor / entrepreneur try to teach monkeys working for minimum wage how to make it. I had a very interesting experience with a fancy home made indicator for the ES: I spent months developing it and then used it for about half a year quite profitably, at least that's what I thought, but then I ran a backtest, and the exact data that I had traded profitably was only break even before commissions in the backtest. I concluded that the indicator itself wasn't really worth anything, but it gave me the confidence to start trading and keep trading, even though all my profits must have come from execution skills. (Or does anyone have a better explanation?) Interestingly enough, after finding out that my indicator was worthless, I could not trade the ES profitably anymore. Therefore I focused on NYSE stocks, using the ES as an indicator. And guess what: I repeated the same experience, being profitable for a few months, the finding out that the ES alone where not a sufficient indicator to trade NYSE stocks profitably. Now I trade mostly futures, and the only indicators I use are price, market depth when available, and sometimes a SMA. I am, of course, aware (as much as my brain allows) of support/resistance and sometimes draw a trend line or two, I don't know if you consider those to be indicators. For stocks I also use volume, but in futures like the ES I tend to ignore it.
Remiraz, Only the homemade stuff may possibly work, provided you keep it at home of course. nononsense
Yes I have developed some on my own and have modified others. I then combined them using a scoring system and plot the "total score" against the stocks price. I have an indicator to measure a stocks trend and a stocks counter trend. Here is a sample chart....
I've got to ask this question: was there something about those six months that was different in the market that made it profitable? If you can figure out what the "it" is, then you may be able to salvage your indicator. It may need to be tweaked as the economy/market change fundamental/technical characteristics. Six months of profitable trading may not be "a random walk". One thing I was always do is test my indicators in different markets (i.e. time periods) and on different indexes/stocks/ETFs, etc. This can be very revealing. You've probably tried all this, I just hate to see you not look into it a little more...
I realize the market changes constantly, but the thing is, I took my signals from that indicator and entered the trades (in the form of limit orders) manually. After 6 months, I backtested my indicator on the data where I had actually made a profit, but of course in the backtest I could not enter orders manually, which means I eliminated every last bit of discretion from the trades, which led to the indicator not being profitable. Therefore, I believe the profitable part of my trading must have been the little bit of discretion I applied when entering (and also sometimes when exiting) my trades. This belief is further affirmed by the fact that I now trade the ES profitably without any fancy indicators. The difference is that I now have the confidence to wait and see what happens next if my brain tells me the odds are still in my favor. I didn't have that patience before using my homebrew indicator, so I always got out as soon as I had a tiny little profit and often hesitated to get out of my losers. When I started using the indicator, I still sometimes hesitated with the losers, but I was very patient with my winners, because the idicator was not giving me the exit signal yet.
First of all, thanks guys, for taking the time to contribute;Especially TSOKAKIS, who posted details! nononsense, isn't there anyone who trades profitably with commonplace indicators? I read one post over at MoneyTec by this guy who reveals that he trades profitably using CCI crossovers, Donchian Channels, EMA and RSI only.
It doesn't matter what you use, you can use astrological signals if you want, what matters is positive expectancy, discipline and consistency.