What lags and what does not?

Discussion in 'Trading' started by fearless9, Nov 25, 2008.

  1. Some say indicators lag and some say that you cannot even trust price bars since the knowledge is past tense by the time the bar (almost) closes.

    Quite frankly I am incapable of understanding what any of this has to do with trading ... however, each to his own.

    As far as I am concerned the only thing that does not lag the current tic is a limit stop.

  2. Hey fearless,

    I'm the king of analogies so let me see if I can clarify things for you.
    Everything lags . . . as soon as something is printed it is history.
    The markets are randon and chaotic.

    Now that being said . . . imagine a boxer, the heavyweight champion is standing in front of you and he's pissed because you just ran over his new bicycle with your car. He pulls back with all of his might with his fist and aims directly at your nose. Then he releases all of that strength and momentum at you.

    People want you to believe that the instant his fist is 2 inches from your nose, with all of that force behind it, that there is no way to accurately determine that he will connect and spread your nose all over your face. They want you to believe there is no way to base that decision on the instances that proceeded that exact point in time. Those instances were in history and nothing can be determined based on historic data right? WRONG!

    You can't ever be 100% correct but . . .

    If one lays out ALL of the preceeding randon market data that is specifically generated from a specific symbol, accurately and without variables, one can increase the probability of reading incremental moves in the price of that chart with great accuracy.

    Some chart instances can't be read due to noise and consolidation but some chart instances can be read with perfect clarity and those are the points that intelligent traders wait for patiently each and every day.
  3. people will say all indicators lag because they are based on historical data.

    that's technically incorrect, however, as a 10 period MA is not lagging unless you offset it. A 10 period MA is showing you in real time exactly what a 10 period MA is at that very point in time. Live data. Not lagging.

    Obviously that applies to any indicator.

    I'm new to posting here but I've spent years lurking before I registered, so let me anticipate all the answers that will follow.

    Some people will say L2, DOM, or whatever other "looking at pending orders" tool you want is leading because it shows stuff that hasn't happened, but might happen. Of course 99% of the time these tools move too quickly to be of any use to humans.

    Some people will say all indicators lag and don't use them. Only use price action, which does not lag. But they will not offer up a definition of what "price action" means, only that "you should learn it." So, get to studying.

    Some people will say all indicators lag so they're all worthless because they're based on past data. Then other people will jump in and say "I'm profitable and I use indicators!!!! But my method is secret I cannot share it with you so you just have to take my word for it!!!"

    I think that pretty much covers it. I've summarized with will be a 10+ page disucssion in 3 paragraphs.
  4. Oh I forgot:

    jack hershey will come in and post some long ass reply full of 50 cent words, but it will all be hugely ambiguous and not mean anything. There will be a chart or image attached but it also won't mean anything.

    Then that other guy (sorry, I forgot your name) will come in and post the same thing he cut and pastes in every thread where jack hershey posts, the one where he shows his losing track record and then the pic of the guy in the straight jacket. lol that's hilarious.

    A few people will come in and link you to the AHG thread which is over 1,000,000 pages long and say "go learn price action from this thread which is now closed and all the trades in it have left and have their own secret chat room somewhere where they make $100k per day." It's a good thread but a bit long and there are too many references to fibonacci voodoo. Funny still how amonst those 1,000,000 pages, there is no definition of "price action."

    Some noobs will pop in and be all "hey, what settings do u use for popular indicators? MACD is a good indicator, innit"

    I was gonna say ProfLogic would come in and pimp the ergodic (which I will honestly admit, probably sucks the least out of all commercially available indicators) but he already posted.

    That's all I can think of for now. :D
  5. And some will come in here and put you on ignore. What else is there to do with someone who insists 10 bar old data isn't...old?

    Cheers, mate.
  6. :) Yes, you've pretty much covered it. Oh, believe it or not I agree with you on the Ergodic . . . it lags and sucks the least out of what I've found too. No pumping required.
  7. Well for those of you who don't have me on ignore, I never said 10 bar old data wasn't old. It is. I said a current 10 period MA is not old; it's the exact current value of 10 periods averaged data.
  8. I thought you used the ergodic for all your trading decisions! I'm surprised to hear you say it sucks :eek:

    edit - misread your post
  9. in all seriousness, i would participate if there was an ergodic thread (kind of like how everyone in the SPM thread now worships the MACD)

    *wink* *wink* *nudge* *nudge* proflogic
  10. The formula to determine indicator lag is the following

    L = (N/2) -1

    where L is the LAG (in bars), N the number of periods you are basing your indicator on

    Therefore a 10sma lags by (10/2) -1 = 4 bars

    a 34ema will lag prices by (34/2) -1 = 16 bars.

    that means your 10sma will turn around 4 bars after prices went above it if they initially were below

    34ema is 16 bars.

    this formula is valid for all indicators.

    those who pretend that their squiggly colored line isn't lagging are in denial

    the only indicators that arent laggin are the ones calculated on 2 bars.

    2/2 -1 =0
    #10     Nov 25, 2008