Tech Analysis Chart Length

[Luc1Grunt]

With some recent questions regarding TA, here is a great post by alex on chart length and their usage.

He is on the money in the comment about using a closing bar on an intra-day chart. The close of a 1, 5, 10 minute bar is absoluteley irrelevent intra-day....it is just a a line in the sand. Same with 89, 100, 200, 500 tick etc.

http://www.elitetrader.com/vb/showth...hreadid=108863

[netwrangler]

Originally Posted by Luc1Grunt

With some recent questions regarding TA, here is a great post by alex on chart length and their usage.

He is on the money in the comment about using a closing bar on an intra-day chart. The close of a 1, 5, 10 minute bar is absoluteley irrelevent intra-day....it is just a a line in the sand. Same with 89, 100, 200, 500 tick etc.

http://www.elitetrader.com/vb/showth...hreadid=108863

After following your link, I googled up this link for a definition of ADX. I was not familiar with the term. Thought I might not be the only one.

Watching the Intraday market certainly has a different feel to it compared to following a portfolio on a daily, weekly, monthly, or quarterly basis. The link in your post goes a long way to explaining why.

[Luc1Grunt]

Description

The Directional Movement indicators are actually used as a system to detect trends within a
stock, typically used for determining entry and exit points. Developed by Welles Wilder [Wilder
1978], a buy signal is determined by the +DI rising above the -DI; afterwards, once the +DI falls
below the -DI, then a sell signal is generated. Additional interpretations involve using crossover
of the +DI and -DI to verify the buy or sell signal.
The DI Difference measure subtracts the -DI(n) from the +DI(n). This can be used to find trends
in the difference between the +DI and -DI, as well as discovering convergence or divergence
between the two values.

Net.....A while back I built and tested a system with ADX/DI. As the primary indicator it was absolutely worthless, or at least nothing better than a coin flip. I then converted it to intra-day and had better results, but still well short of an "edge".

After adding positive 60 day slope, macd, and stochastics...I got the win% up to about 58%, risk to reward was 1 to 1.3 (unsatisfactory), and drawdown was unacceptable.

I then weened it down to a confirmation indicator and still found it too laggy.

You could actually compare this approach with a MA 10 / MA 5 crossover and get worse results!!!!!

I never did trade it, but I watched the results for about 3 weeks confirming the backtest.

It has it uses, but not as a primary indicator...

It is no longer on my charts intra-day or daily/monthly.

Oh, yeah......In My Opinion.

[netwrangler]

Originally Posted by Luc1Grunt

Oh, yeah......In My Opinion.

And a valued opinion it is.

I break trading analysis into four areas:

1. Fundamentals

   Fundamentals set the scene for the analysis. They also provide some deus ex machina factors that are ignored at one's peril.

2. Running the Numbers

   This is the fun part for the spreadsheet jocks. Slicing and dicing the data can provide insights that are unavailable from any other process. While correlations and links are a joy to find, lack of same can be important information as well.

3. Grokking the Chart

   Robert A. Heinlein's book "A Stranger in a Strange Land" introduced the term grok to our language. It implies understanding something both intellectually and at a gut level. I suspect the secret with charts is the same as the 'secret' of musical virtuosity...practice, practice, practice. After a while, you can grok it.

4. Getting the Rhythm
   • In the commute, you are always, and effortlessly, in the correct lane.
   • In a sailboat, you are sliding down the backs of the waves as you beat to windward.
   • In tennis, you are in the zone.
   • As my grandson often reminds me, "The secret of life is...tiMING!"

Getting it right in these four area isn't something you cram for like a mid-term. People can spend a lifetime studying the intricacies and interactions involved—indeed many do. But the 80/20 rule applies...sort of.

I approach this task with humility and anticipation. And as I do, I think of Archibald MacLeish and Andrew Marvell. "Had (I) but world enough, and time...."

[Luc1Grunt]

Heinlein....way ahead of his time!

I like the 4 steps.....each has it's needed place in the puzzle. Skip a step, lower your own probability.

[Luc1Grunt]

And don't forget another Heinlein(ism).......


TANSTAAFL (There Ain't No Such Thing As A Free Lunch)