Price action is king, but don't diss indicators yet

Discussion in 'Automated Trading' started by alex.samant, Aug 1, 2008.

  1. kut2k2


    Yeah, care to explain how we automate trading "naked charts and lines"? And what lines, btw? Trend lines? Are you not aware those are indicators also? Ditto s/r lines.
    #21     Aug 5, 2008
  2. Regardless of what term you use, it's shocking how easy it is to formulate a consistent automated strategy using S/R lines and price action directly compared to any other form of formula based indicators.

    Still, I suspect the original poster may be correct that using some type of formula to get the market direction *may* be good.

    For example, I find it intriguing to work on how to describe a "bounce" to my auto trade system.

    I started with this rule:

    if low 5 days ago > Resistance and low crosses above Resistance then
    go long

    That works most of the time. But I had a few weird cases where that 5th day ago was higher then the resistance but all the ones before and after it were below.

    So, to a human being, it absolutely was not a bounce.

    Another technique using weekly lows works better but still leaves several exceptions that fit the rule but obviously aren't bounces on the chart.

    The moral of the story is that I may end up testing a formula and to compare prices a week ago to now to see the direction to indicate a bounce.

    Frankly, I dropped formula based indicators entirely also. But it's worth testing if one of those old devils might be worth something after all.

    Of course, like the OP said, the actual trade decision for the bounce must be based on actual price action happening right NOW (as in, not lagging).

    #22     Aug 5, 2008