How do I accurately choose the period for indicators?

Discussion in 'Strategy Building' started by newbie003, Oct 6, 2019.

  1. newbie003


    Hi guys! I'm new to trading, been educating myself on indicators, chart patterns, etc,. They always teach you how to use them, their history, etc,. but they never seem to tell you how to choose the period for an indicator, for example: Stochastic Oscillator has the period K and period D set to 13 and 3 by default (default settings for the trading platform that I use) Why is that? Why is it 13 and 3? Does changing the period make any effect on the accuracy of the indicator? Does it depend on the time period of the chart? If the time period of the chart is in minutes, does that mean 13 period is 13 minutes and 3 period is 3 minutes? Also another thing that I've noticed is that some traders can predict the exact time the market is going to be bearish or bullish in the future, for example: at X time in the future, the market will be bullish. How do they do that? Is there an indicator for that or is it just an experience related thing? I've tried looking all this stuff up on YouTube and Google but nothing's been helpful so far. Could you guys please help me?
    murray t turtle and tommcginnis like this.
  2. Overnight


    Really? Would love to meet them, and give them half my profits I would make off their "exact times" they expect the market to move in a certain direction.

    Basically, you are looking at indicators with default settings. The parameters can be changed by you, so your indicators make sense to YOU.
    killer007, bone, Scataphagos and 3 others like this.
  3. tommcginnis


    It's a tar-baby artifact of history; nothing more. It's what the indicator was popularized with, and nobody has had the intestinal fortitude to change it -- either they don't use it themselves, or they're pussies.

    It absolutely, 100% does. Play with it yourself and see.

    I have found that to be a fair question, as about 33% of the time it makes a difference, 33% of the time it doesn't, and 33% of the time, I can't tell, I give up, and throw the indicator off my charts.
    Yes. And so, if you want a 50-day MA on an hourly chart, you've got to specify [50*24] as your look-back parameter.

    Predictions: I predict that Eric & Donald Trump, Jr. will run {together} for President in 2016, only to be defeated by the Twerk/Jerk Party ticket of Miley Cyrus and Kanyé West. Tell me what I used for an indicator there..... Nothing? Correct. But what'd it cost me? Nothing.

    Lastly, two thoughts:
    • ANY indicator on your screen should work better than 50% of the time -- elsewise, you should be flipping a coin. "Science!" baby..... :wtf:
    • Your questions are the best ones on indicators that I've seen in 2019 -- and it's October, so that's sayin' somethin'....:fistbump::fistbump::thumbsup::fistbump:
    bone, Orbiter, HobbyTrading and 4 others like this.
  4. If I were you I would forget the indicators and just learn how to read a bar chart. The indicators are only there to confirm what is on the chart, not the other way around. Volume is probably the most important indicator you should be looking at. And keep in mind that all indicators are laggy and not always accurate, which is why you need to learn to depend what is on the chart first. Oh yeah, and 90% of traders fail, so expect the worse...
    Last edited by a moderator: Oct 6, 2019
    cafeole and wartrace like this.
  5. %%
    How do they'' predict'' ?? They do not '' predict'' IF they could predict they could own almost all the world quick LOL. I was about 95% sure they would buy the 200 day moving average/SPY but labeled it ''not a prediction'' 13 + 3 are ok, sideways slopchop; 200 days /dma is better, less commissions;
    even if you can get free commissions, maybe, less slippage + less sec fees.

    One of my charts defaults to 13...…………………………. moving average- I changed it...….. I saw a WSJ chart on DOWuse 65 day moving average; but I don't trade/invest DOW + 65dma is too little to late . Wisdom is profitable to direct.:cool::cool:,:cool::cool::cool::cool::cool::cool::cool:
    birdman likes this.
  6. Turveyd


    Likely talking about news times, expect a move then ignoring all the times they get it wrong, old trick.
    Overnight likes this.
  7. maxpi


    Markets just don't fit preconceived math. Maybe indicators can be made to win frequently enough with win/loss ratio good enough to be profitable for awhile but the odd market will come along to even the score seemingly.
  8. panzerman


    First of all, if prices evolve as a random walk, then all of technical analysis is charlatanism. The degree of randomness is perhaps a philosophical debate that you need to have with yourself.

    As far as adaptive indicators, there are plenty of methods to dynamically adjust and tune parameters. Look first at the work of John Ehlers.
    Orbiter likes this.
  9. I suspect people like to never change their parameters to avoid yet another source of overfitting. You can find settings/parameters that "work best" for any piece of price history - but that is not the same as the settings that will work (probably by accident) in the future. Finding parameters (and more generally indicators) the result of which aren't accidental (i.e. random) is the key problem.
    tommcginnis and Orbiter like this.
  10. easymon1


    hey Mr Overnight, you and me both!

    one of the folks that do that is Norm 'calls em to the minute' winski, at astro-trend com.
    wear an athletic supporter if you're gonna trade his calls, or just have wayyy more money than you plan to ever be able to use. I don't think he pays half your losses tho. lol
    he does a spot on lp's online show couple three times a month, depending on the stars. some of the calls are incredibly correct to the minute. some, well, not so much. your parsecs per dilithium crystal may vary.

    wow, just went to his website. his 35th anniversary issue was in 2013!

    #10     Oct 7, 2019