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There is no such thing "Laging indicators"


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There is no such thing "Laging indicators"

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  #1 (permalink)
 baruchs 
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I read this forum a lot. Once in a wail someone states about indicators lags.
T H E R E is N O S U C H T H I N G.
All indicators are predictive/leading. If they are good predictors or not its another story.
The same goes to patterns and so on.

Baruch

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 JamTheTrader 
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Baruchs,

I understand what you are saying, I think!

But I have to disrespectfully disagree with the statement except maybe from a psychological point of view!

From a mathematical point of view, many are (made up of past prices) to which we will attempt to predict the future.

With that said, we also use past prices to predict future areas, Fibs, Elliot Wave, Gann, Cycles and so forth.

JAM

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 baruchs 
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That is exactly what I'm saying. Every decision you make, in technical analysis, relay on past and predicts the future. Its not a psychological point of view, its TA.
So please no more talk about lag!

Baruch

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 JamTheTrader 
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lol

So the term "get the lag out" really doesn't mean a whole lot does it.

Just a different way to look at the past with different mathematics to plot what might happen in the future

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 gregid 
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baruchs View Post
So please no more talk about lag!

Baruch

lag - hang (back) or fall (behind) in movement, progress, development, etc.

Well Baruch I believe it is your choice - if you consider lagging as a nonimportant factor I leave it up to you.
Lag is a natural phenomenon for all indicators using past data and their averages.
Personally I don't think there is such a thing as no lagging indicator but there are some that are more and some that are less lagging.
And I am sorry to disappoint you but in most cases I would rather use less lagging (e.g. EMA vs SMA) and as much as I tolerate your vew it won't stop me from discussing the lag which I consider as an important factor.

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 baruchs 
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Jam,
I see that you insist that lag does exist. In your mind if I tell you that I have a method that says if the price is above SMA200 on a 60 minute chart and then the price goes down and touches the SMA enter long, you would says its great but if you make it SMA100 you cut your lag in two.
After a deeper thought you come back and say make it 50 or even better 25 or 12...
After more deeper thought you come with an excellent idea. You say now that we use SMA1 on 60 minute chart lets cut the lag more. Lets go to 30 minute chart, 15, 5, 2, 1. Even better lets trade with SMA1 on a 1 tick chart, then we have minimal lag.
What a great idea, I don't understand how I didn't think of it before.
Another point

Quoting 
From a mathematical point of view, many are (made up of past prices) to which we will attempt to predict the future.

This statement implies that there are some or at least one indicator which is not made of past prices, but from future prices. Please please I want to buy it. I'm willing to pay 100K now.
The only one I know of is a Cristal ball, but its not TA, so I'm not interested.

The right view on indicators is making a statement, like one I made with SMA200 and then testing it if it has a statistical edge. Thats all.
Thats why indicators and bar patterns are the same. You see a formation and after it a price move and you test it, if it has an edge.
Indicators are better than price patterns, because there are huge amount of them. With price patterns you are able to track only geometrical shapes or body parts (head&shoulders) unless you use computers for pattern recognition.

Baruch

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 Zoethecus 
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Some submit that volume is a true predictive indicator of price direction, but I have not seen any indicators in this category that consistently have an edge.

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 KJAVED 
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baruchs View Post
Jam,


With price patterns you are able to track only geometrical shapes or body parts (head&shoulders) unless you use computers for pattern recognition.

Baruch

I disaggree with you about your this statement, as nothing is better than human brain, and it can recognise in better way with trade decisions. If some one be able to recognise patterens by its own and patteren within patterens, then he will be able to make better trade decisions. All Compuer recognise patterens create lot of confusions, Ist try o read all details about patterens and then try to find them in live markets by coordinaion of different charts. Once you build vision abot them , thats better than computers.

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 baruchs 
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Can you give me an example of a pattern that your brain can identify.

Baruch

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 KJAVED 
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baruchs View Post
Can you give me an example of a pattern that your brain can identify.

Baruch

I do not want to argue on that matter, as that may useless. I just give you some cluses in 6A, It set a excellent example in last couple of days. It was going for Butterfly on 240 min chart, but at same time patteren with in patteren for Butterfly also in progress on 60 Min. chart, As long trend more dominent so 60 min chart just give small trade for long at its unfolding point and give a long trade more than 50 pips but failed as it is against long term trend, so 6A pushed up to Exact unfolding point of 240 min chart, and unfold for long, with more than 100 pips uptill now. I can post charts for that one , but I give you clues, you do some work at your own end, this will clear your concept.

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 RJay 
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baruchs View Post
I read this forum a lot. Once in a wail someone states about indicators lags.
T H E R E is N O S U C H T H I N G.
All indicators are predictive/leading. If they are good predictors or not its another story.
The same goes to patterns and so on.

Baruch

Just when I thought I had seen everything.

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 baruchs 
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I'm sorry. I probably misunderstood, Butterfly is it a geometrical form or not?
My point is that if I give you a great setup, the greatest, which go like this:
1. First bar should be an up bar, max length of 10 ticks, the body of at least 5.
2. Second bar a down bar bla bla bla. And so on for 10 bars.
Its a great pattern as I said, the price explodes after that.
Will you be able to verify this, or you will just take my word for it?
My point is that with indicators, witch are a smoothed representation of the price action, some may say even they filter the noise, you have an unlimited number of setups you can check. Thats all, I don't say that price patterns are no good only that they are harder to spot.
With all do respect I don't need your setups. If they are good keep them to your self like I do with mine.

Baruch

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 baruchs 
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Quoting 
Just when I thought I had seen everything

Rjay,
If you are a beginner as your status says, then probably you didn't see everything yet.
Same for me.

Baruch

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 RJay 
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baruchs View Post
Rjay,
If you are a beginner as your status says, then probably you didn't see everything yet.
Same for me.

Baruch

Baruch,

I am absolutely a beginner With the actual trading of this business.

However, I am a student of the markets and a programming analyst of trading indicators, charts and strategies for the last 2 years.

I have created hundreds of versions of various indicators and many unique indicators of my own.

I have created three unique chart types, and automated strats that don't wait until the next bar to execute.

Other than that, perhaps you could educate me.

Please select the moving average of your choice and demonstrate to myself and the curious, its predictive/leading characteristics.

Please includes charts with your explanations. Thanks!!!!

Your Student,

RJay

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 sharky 
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why do all the new people come here and start talking like they are telling us things we didnt already discuss a million times lol ...sharky

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 sharky 
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why dont you guys focus on simple trading methods for all the new traders instead of trying to confuse everyone,this site is a great place to come and learn and teach but keep it simple so everyone can follow, the new traders have so much to learn and still so many battles to wage its not fair to just throw them a bunch of crap to slow their learning curve...sharky

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 Peter2150 
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sharky View Post
why dont you guys focus on simple trading methods for all the new traders instead of trying to confuse everyone,this site is a great place to come and learn and teach but keep it simple so everyone can follow, the new traders have so much to learn and still so many battles to wage its not fair to just throw them a bunch of crap to slow their learning curve...sharky

I agree with you sharky. Matter of fact I find this thread a bit amusing, and it reminds me of one of the greatest Forex Factory threads.

AMAZING Strategy!!! @ Forex Factory

Pete

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 Dragon 
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That thread was funny. There are one or two here that I can think of...

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 Blz17 
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baruchs View Post
I read this forum a lot. Once in a wail someone states about indicators lags.
T H E R E is N O S U C H T H I N G.
All indicators are predictive/leading. If they are good predictors or not its another story.
The same goes to patterns and so on.

Baruch

All indicators are lagging. Show me one indicator that will tell you where price will be 1 min from now. The indicator itself is always lagging based on old data. It's your subjective interpretation of that indicator that has predictive qualities not the indicator itself. You're confusing predictive qualities with predictive interpretation.

Blz

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 baruchs 
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Hi to all,
It was my time to go to sleep and I woke up with lots of replies, but with no original thought.
I don't say that the indicators on them self are predictive. Only that they have an anchor point. Like price patterns and everything else in TA. You make a statement, to your self, and you try to validate it. If you did, great you have a starting point to a setup.
The most common example is MA cross, but the same is for FIB levels. People think that because the Fib retracements or extension tools show you levels in to the future they are predictive but because MA cross does not, its not a predictive tool. The truth is that they are exactly the same and so are price patterns. Your point of view should be of predictive nature. Your only question should be: If this indicator did this move what the PRICE will do next.

The last thing I want to say on this thread is that I question everything. So if some one gives a statement about trading, I think about it a lot and only then come to a conclusion if this statement is correct or not. (The emphasis is on a lot). So please if you want to contradict my statement your most welcome, but please take a moment (few hours) to think it through.

Baruch

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 Peter2150 
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Let me try and restate what I would call my take on this.

1. Indicators do nothing more than show in a different manner what price has done. After all they are based on some length of prior prices. That in and of itself has no predictive value.

2. One can observe if price/some indicator has done something X in the past and 7 out of 10 times price did something Y then one can say there is a 70% probability that if price/some indicator is currently doing X, that in the future price may do Y. To that extent one could say the price/some indicator action has a predictive value.

Pete

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 RJay 
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baruchs View Post
Hi to all,
It was my time to go to sleep and I woke up with lots of replies, but with no original thought.
I don't say that the indicators on them self are predictive. Only that they have an anchor point. Like price patterns and everything else in TA. You make a statement, to your self, and you try to validate it. If you did, great you have a starting point to a setup.
The most common example is MA cross, but the same is for FIB levels. People think that because the Fib retracements or extension tools show you levels in to the future they are predictive but because MA cross does not, its not a predictive tool. The truth is that they are exactly the same and so are price patterns. Your point of view should be of predictive nature. Your only question should be: If this indicator did this move what the PRICE will do next.

The last thing I want to say on this thread is that I question everything. So if some one gives a statement about trading, I think about it a lot and only then come to a conclusion if this statement is correct or not. (The emphasis is on a lot). So please if you want to contradict my statement your most welcome, but please take a moment (few hours) to think it through.

Baruch

Anticipating the market is how a trader makes a profit!!!!

Why didn't you say so in the first place!!!!

I agree with you 100 percent!!!!



RJay

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 FBJS 
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It all depends on what you mean by "leading" vs. "lagging". Technically, all indicators are constructed from past price data, so they could all be considered "lagging" in that respect. On the other hand, everyone tries to use indicators as a basis for predicting future price behavior, so I suppose you could call them all "leading" in that respect (although I wouldn't choose that particular definition myself.)

The most common definition I would say is as follows:

A lagging indicator is one that will turn only after price action has turned in a particular direction. For example, a moving average. You will never, ever see a moving average turn before the price itself does. That's what makes it "lagging".

A leading indicator is one that attempts to predict the future by using past data, and will sometimes turn before the price does. Case in point, most oscillators such as stochastics. You will often see a stochastic turn before the price actually changes the direction. The price to pay with leading indicators like oscillators is that they will often give you false signals as they turn too quickly. If you try to take every stochastic turn as an indicator of the market changing direction, you will quickly get killed (especially in a trend).

There is nothing magical about the words "lagging" or "leading" in my opinion, it just describes different ways that indicators parse data.

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 baruchs 
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FBJS,
Every decision we make in trading is made on past data. Thats the essence of TA.
The point I wanted to make in this thread is that you have your indicators or price patterns or whatever. They all consist of past data. Now you make assumptions into the future on their past behavior. If your assumption is good that means that in a long run you will be profitable.
What is good in trading, compared to other professions, is that you can check your assumption on past data. It does not guarantee for the future, but again this is TA. This is the best you have. It still is better then if you are in a fast food business and you want to open a new restaurant in a new location. You can gather different data to predict if this restaurant will succeed, but you can't make a simulation like in trading.
Look at this statement:

Quoting 
So the term "get the lag out" really doesn't mean a whole lot does it.

This statement was made on this thread by a mentor, a teacher!
Its pure bullshit and thats what I wanted to prove here.

As for your statement:

Quoting 
A leading indicator is one that attempts to predict the future by using past data, and will sometimes turn before the price does. Case in point, most oscillators such as stochastics.

Well I don't see how it can be even close to truth.
Here is a code of stochastic: (the whole code)
 
Code

nom.Set(Close[0] - MIN(Low, PeriodK)[0]);
den.Set(MAX(High, PeriodK)[0] - MIN(Low, PeriodK)[0]); // PeriodK = Kperiod

K.Set(100 * SUM(nom, Smooth)[0] / (SUM(den, Smooth)[0] == 0 ? 1.0 : SUM(den, Smooth)[0])); // Smooth = SlowKperiod
D.Set(SMA(K, PeriodD)[0]); // PeriodD = SlowDperiod
Please explain to me how it can turn in front of price?
The difference between indicators and oscillators is that oscillators are better suited for sideways action, but this is not the point in this thread.

Baruch

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 FBJS 
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baruchs View Post
FBJS,

Please explain to me how it can turn in front of price?
The difference between indicators and oscillators is that oscillators are better suited for sideways action, but this is not the point in this thread.

Baruch

It can turn before price, as long as you accept the definition that "price" means the "trend of price". In the attached picture, you can see that a stochastic crossover occurs before price has officially broken out of a minor downtrend, and that price then follows it shortly thereafter. In a trend, you can see an oscillator actually turn against the trend and point opposite to the direction of price action for some time. When that happens, one of two things will occur - either the price action will follow the oscillator and start to reverse, or the oscillator will eventually "admit that it was wrong", and turn back towards the price trend. If the price action follows the oscillator, we can say that the oscillator turned "before price". If the oscillator turns back to the trend, then it was "wrong". Actually oscillators are pretty useless in trends, unless you use them to confirm turns back towards the trend direction. They are terrible at indicating the end of a trend, because you will get a lot of false reversal signals before the final turn which ends up being "correct".

Perhaps a better way of saying it is that oscillators turn very slightly before, or alongside price action.

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 baruchs 
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FBJS,
I'm sorry to say that I don't accept your definition for oscillators, but its not a discussion in this thread.
My point is that you should look at indicators, oscillators and price action only in one way:
And it is that you see some movement in them and after that you see a movement in price, so you speculate that this behavior will repeat it self. Then you check in back testing if this assumption has any ground.
Thats the only view point to indicators and such.
I don't need an SMA to tell me that price is going up or down, I can see this by looking at the price. I need SMA or what ever to show me points that I can exploit.
Thats why its stupid to talk about LAG!

Baruch

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 gregid 
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baruchs View Post
Thats why its stupid to talk about LAG!

Baruch

So far you are the one who spends the most time talking about LAG.

Seriously - I find it unreasonable to have such a confidence in the statement defying reality

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 FBJS 
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baruchs View Post
FBJS,
I'm sorry to say that I don't accept your definition for oscillators, but its not a discussion in this thread.
My point is that you should look at indicators, oscillators and price action only in one way:
And it is that you see some movement in them and after that you see a movement in price, so you speculate that this behavior will repeat it self. Then you check in back testing if this assumption has any ground.
Thats the only view point to indicators and such.
I don't need an SMA to tell me that price is going up or down, I can see this by looking at the price. I need SMA or what ever to show me points that I can exploit.
Thats why its stupid to talk about LAG!

Baruch

I think that we seem to be arguing mostly about semantics and definitions here... since we seem to have different definitions for certain words, we're not going to agree on certain things. If you read my original post, you can see that I offered multiple definitions for what "leading" and "lagging" could mean in a few different contexts, depending on how you looked at it. (I then offered my personal definition, which you obviously don't agree with.) In any case, arguing about simple wording differences is probably not all that useful as an activity, so let's just agree to disagree on our definitions. In the end, price movement is what it's all about, regardless of the filter that you want to use to look at it.

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 baruchs 
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The only thing that I hate is stupid people, but I love stupid traders.
I hope this doesn't make me a bad person.

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Andrew
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may I...my 2 cents ...
there is some popular opinions that some indicators are lagging and some not, well at some level or in certain conditions that's right, but...
for example Stochastics, usually they could be considered as lagging indicator, right ?
now focus-pocus
Sto is lagging in trending market, but it's 100% ahead of anything in range market, if you know exactly ranges you are trading and stochastic periods are set correctly.
I.e. if you can make more or less reliable curve fitting of certain cycles trading with that will be plain vanilla.
However best indicator is very complicated and sophisticated indicator, really Holy Grail used just by pro and not disclosed to anybody, the name of that indicator is price

Anyone who interested and ready to discuss/share any "old set ups", i.e. different kind of lines, ranges, levels, ticks below low/above high, etc., etc. are more then welcome.

P.s. I enjoy a lot discussions here with real pro as what differs real pro from "false" pro is very simple thing : real pro knows exactly what he is talking about, having it clearly structured and simple.


Krgds,
Andrew

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Andrew
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FBJS,

But how you deal with "false" stochastic crossovers ?

Krgds,
Andrew


FBJS View Post
It can turn before price, as long as you accept the definition that "price" means the "trend of price". In the attached picture, you can see that a stochastic crossover occurs before price has officially broken out of a minor downtrend, and that price then follows it shortly thereafter. In a trend, you can see an oscillator actually turn against the trend and point opposite to the direction of price action for some time. When that happens, one of two things will occur - either the price action will follow the oscillator and start to reverse, or the oscillator will eventually "admit that it was wrong", and turn back towards the price trend. If the price action follows the oscillator, we can say that the oscillator turned "before price". If the oscillator turns back to the trend, then it was "wrong". Actually oscillators are pretty useless in trends, unless you use them to confirm turns back towards the trend direction. They are terrible at indicating the end of a trend, because you will get a lot of false reversal signals before the final turn which ends up being "correct".

Perhaps a better way of saying it is that oscillators turn very slightly before, or alongside price action.


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Andrew
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Great post !!!


sharky View Post
why dont you guys focus on simple trading methods for all the new traders instead of trying to confuse everyone,this site is a great place to come and learn and teach but keep it simple so everyone can follow, the new traders have so much to learn and still so many battles to wage its not fair to just throw them a bunch of crap to slow their learning curve...sharky


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 FBJS 
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Andrew View Post
FBJS,

But how you deal with "false" stochastic crossovers ?

Krgds,
Andrew

Technically, no indicator is really "false" or "true" at any point in time... it's just a calculation of price movement. Certain types of indicators are designed to capture certain types of price movement. For example, a moving average is specifically designed to be used with trending movement. If you try to use an MA in a range with a period that is too long, you will just end up getting whipsawed as you constantly get long at the top of the range, and short at the bottom. On the other hand, if you use it in a strong trend it will perform beautifully.

Stochastics and other oscillators are mathematical calculations that assume a ranging type of movement. They make the assumption that when price extends itself, it will pull back. Based on that type of market movement in a range, stochastics (or any oscillator) will work beautifully... but in a trend, they will constantly turn in what you would call a "false" manner as the trend continues against you.

Technically, none of these movements are really "false" or "true", it's just a question of using the right tool for the right market condition. Trying to trade stochastic reversals against the trend or MA crossovers in a range is like trying to play tennis with a hockey stick... it's the wrong tool for the job. Therefore, your job as a trader is to give yourself a proper set of tools that appeals to you, and then understand the correct market conditions in which to use these tools. No indicator is going to tell you when market conditions are changing with 100% reliability... it's just too complicated to program or backtest. However, if you stare at the market long enough, learn to recognize the different types of movement that it makes, and then learn to recognize the very small signs that occur as it transitions from one phase to another, you can learn to apply your tools properly using your own intuitive feelings and experience.

Let's take a concrete example:

Suppose a market is in a consolidation range. It's going up and down. You notice this, and decide to trade it using a stochastic or some other oscillator. So you start taking a few trades and make some money. However, after some time you start to notice that your last couple of trades haven't worked, and looking at the chart you now notice that it has changed into a choppy downtrend. It's no longer really in a range - one side is starting to win.

So now you switch over to an MA on a chart that you have designed for this condition, establish a short position as it comes back to the upper trendline of the choppy movement or approaches this MA, and just hold this position. The market continues to move down as the bears start to drive the bulls further and further. At this point, the bulls start to notice more obviously that the market is no longer in a range, and some of them try to push it back up in a desperation move. Maybe it spikes a bit further up than usual in response to this attempt and you are stopped out with a small profit. At this point you now re-evaluate: will the bulls succeed in creating a new trading range here, or are the bears going to hand their heads to them?

Let's say that the bears respond to this little bull "line in the sand" by immediately driving it back down with some larger sell orders. Uh oh. The bulls are now in trouble. The choppy trend resumes, and you decide that it's correct to still employ your "choppy market downtrend" strategy so you get short again the same way you did the last time. You know what is likely to happen next: the bears will likely push the bulls to a breaking point where they start to capitulate. The trend may very likely accelerate into a faster downtrend as this happens. It may not happen, but you are looking for the signs if it does.

So let's say that it does start to happen now. Trading speeds up. Price accelerates to the downside. Now, because you are prepared for this, you immediately switch to your "rapid downtrend" strategy. You use a faster MA to better capture this movement, because you know that the most likely thing is going to be a spike low, followed by a reversal of some magnitude. You know what to look for, because you are expecting this type of movement. Perhaps you try to play a few counter-trend moves, perhaps you don't - but you always have a condition in mind that will dictate the "end" of this new and faster downtrend (a lot of this is price-action based). Incidentally, playing counter-trend moves under these conditions is often not a good idea because you have to be very good and very fast... and it's generally not worth it.

So let's say that you are holding a short position, and now the market REALLY spikes down in a huge push and moves very far away from your moving averages, and then pauses. You now know that it is very likely that the trend will retrace back upwards for a certain relatively far distance, as the selling has finally been exhausted, at least for a while. You compare how far the price has travelled at this point away from your MAs, and realize that it is very overextended to the downside. You know that this is the case, perhaps because you have some indicators on your charts designed to show you this condition - maybe something like an MA envelope or bollinger bands. Maybe you notice on a longer term chart that it is also hitting the opposite side of a downward-sloping trend on this higher timeframe, which makes it a good candidate to bounce back to the upper end of the long-term channel. Furthermore, a simple calculation tells you that this downtrend has now gone about 80 ticks, which is typically how far crude oil will run in a trending movement before any significant retracement. (Let's say that's what you're trading.)

So you realize that this is likely to be a good candidate for "the" bottom for this particular downward movement, and decide to enter long with a tight stop immediately. Likely it will be "the" bottom, but even if it isn't, it will probably travel enough ticks back upwards to give you a small profit if you lock it in with a rapid stop. Worst-case scenario, you are fooled and lose a few ticks as it spikes back down through your tight stop. If this does happen, you do not get short again, because you realize that it is very overextended and it's not worth the risk/reward. Instead, you wait a bit and see how it acts. You evaluate how the bulls react to this little "final, final" spike, and if they drive it right back up. If they do, it's a good bet that it's still the bottom and that was just the dying gasp of the downtrend.

Let's just say for the sake of argument that it does start to move back up from your initial long entry and doesn't take you out with a "final, final" spike (usually it doesn't, especially if you can read price action and know the proper time to get in). You now have a very specific set of indicators that you look at to determine when this larger counter-trend upward bounce is over. You have created these indicators by looking at many months of past data and seeing what happened before for this instrument and how it moved under these conditions.

So let's say that now you hold this newly rising market for a good 25-40 ticks. You know that there are two things that can happen: it can be one of those times when it just retraces the entire recent 80 tick down move and REALLY screws the people who got short at the bottom, or more likely it will be one of those times when it just retraces a good way before retesting the bottom again. Let's say it's the latter. Price has gone a certain distance pretty far away from the spike bottom now, and starts to turn back down, so you exit your profitable long position and get short. You do this, because you have been looking for signs of this downward reversal, knowing that it's the most likely scenario.

You are very cautious at this point because you don't know how far it's really going to go back down. It could go a fairly short distance and then reverse violently back upwards in a "gotcha" move, which will tell you that this is one of those times that the uptrend is stronger than you thought. Or it could accelerate down and break the spike low, but that's unlikely after such a large retracement back up, which you now notice is much larger than any of the previous ones in the downtrend that occurred. Most likely, it will go down a good ways, and then make an attempt back up to the intermediate high it just made. Let's say you have a set of MAs tuned for this purpose, so you know what to look for and when to get out if it starts back up. Let's say it does go down a decent amount towards the low (all of this happens pretty fast), and then does start to reverse back up. You are stopped out of your profitable short position for a reasonable small gain.

At this point, experience tells you that all bets are off. The easy money has been made, and most likely we are back in the beginning of a range. The trading may still be relatively fast as bears and bulls are throwing some orders at the market right now, but you notice that the momentum is dying and it's not making a clean break past the intermediate high and low that were just formed. Let's say that past experience has told you that this particular condition (dying trend) is too difficult to trade because the price chops up and down too fast, so you stand aside. As the market continues to slow down, you now notice that a new range has been formed, so you go back to your original stochastic strategy. You start looking for signs again in this range for which way it is likely to break out when it does, and decide to only take range-bound trades in that direction. You also start constantly looking out for signs that the range is over and that a new trend is starting, drifting either up or down. Basically, go back to step 1.

This is just one example of how you could trade a particular market scenario, and it doesn't always follow this exact pattern. The key is knowing what to expect from the market, and that comes from staring at it live and going back over historical data for many, many days and months to see what it did in the past. By knowing what it COULD do in any given situation, you know what to look for at certain key points, and you have different indicators tuned to each condition. You know when to use your stochastics and when to use your MAs, because you are very familiar with how the market moves in various phases, and how it transitions from one condition to another. When you determine that the correct condition exists, you trade a certain system until it starts to fail or you determine that new conditions have arisen. The key is to be constantly on the lookout for changes in market temperament as I have described. There is no easy way to gain this knowledge other than just putting in thousands of hours staring at it and making notes. The good news is that your account balance will in and of itself tell you when conditions are changing, because you will find that certain types of trades stop working. So if you start losing money trading stochastics crossovers at one point, just stop, step back, and re-evaluate if the market conditions are actually appropriate for it.

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Andrew
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FBJS,

Thank you a lot for that !

Krgds,
Andrew

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 NickA 
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OP your premise is utterly false and here is a lagging indicator for tradestation to prove it. it lags by precisely the periodicity of the chart you apply it too.

plot [-1] (Close);

BTW to convert it into a leading indicator that predicts tomorrows close change -1 to +1

Many indicators lag. Not only do they lag but you can compute precisely how much they lag by.

For example a simple moving average is a digital low pass filter. (it filters high frequency components whilst passing low frequency ones). You can reduce the cut off frequency (at the expense of lag introduced into the data that is passed) by increasing the averaging period. It is not rocket science but it is mathematically sound.

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 ronan2505 
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I heard once that if you are driving and the car in front indicates it is turning left, most probably it will turn left, but maybe not immediatly, more than likely it will, however sometimes the indicator could have been accidently switched on and the car may not turn left.

I read into this that indicators are exactly what they say they are, it is up to you to from that moment on. Indicators are very helpfull lagging or not, without them we would all be trading in the dark

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 baruchs 
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NickA,
You say

Quoting 
Many indicators lag.

Well you didn't read my point or didn't understand it, but if you see lag in indicators you don't look and understand them correctly.
You see I don't care if its a 100SMA or 200SMA or what ever. I make an assumption that if price is above the 200 SMA and then goes down it will retract to the SMA and bounce up again. Thats the assumption. So I look into future and I test this assumption. If it has a statistical edge I'm glad and I trade it. I don't think well I can reduce the lag by referring to 100 SMA or 5 SMA...
Its like you say that the sun rises in the east and travels through the sky every 4 minutes the distance of it diameter. Thats what I see and its good for my purposes, to know where the sun will be in 2 hours. Now you come in and say, I was taught in 5 grade that the sun is not traveling through the sky, but the earth moves. You may be right but for the purpose of knowing where the sun will be in 2 hours my point of view is better.

Hope it makes sense.

Baruch

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Richard
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baruchs View Post
Well you didn't read my point or didn't understand it.

No one understands you because you do not use terms with their accepted definition. In order to communicate with people you have to use the same language.

It's like if I go out on the internet and claim: On blatantly, I turnip my simulating.

... and everyone thinks I'm on crack because by "blatantly" I mean Friday, and "turnip" I mean send in, and "simulating" I mean estimated taxes.

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 baruchs 
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Richard wrote

Quoting 
No one understands you

Thats OK, I will not bother you again.

Baruch

p.s.
Refer to post #29

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piersh
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Please read John Ehlers' excellent paper "Poles and Zeros" that can be found on this page where he quite eloquently covers the relationship between lag and error.

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Richard
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baruchs View Post
Refer to post #29

That's cute. Nearly everyone on the forum except you knows what the word 'lag' means in relation to indicators. I'm not going to go around telling people that speed bumps do not exist, just because I can still drive in spite of them. So, I'm not going to go around claiming lag does not exist just because I can still trade with lagging filters. If I did go around claiming that, people would endlessly try to correct me, just as they endlessly pop up in this thread trying to enlighten you on the subject. But of course you won't listen.

In the end, you may have good points to make about how you use indicators. But as long as you continue to communicate it by denying the meaning of accepted technical terms, you will only get confusion and arguments. It's evident, if you look across your own thread. I mean, either you want to communicate with people or you don't.

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 NickA 
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piersh View Post
Please read John Ehlers' excellent paper "Poles and Zeros" that can be found on this page where he quite eloquently covers the relationship between lag and error.

I was going to suggest Ehlers work but to be honest I thought it might be how can I put it tactfully ..... a little challenging for the OP. A signal processing framework is an excellent environment to discuss lag.

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 NickA 
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baruchs View Post
NickA,
You say

Well you didn't read my point or didn't understand it, but if you see lag in indicators you don't look and understand them correctly.
You see I don't care if its a 100SMA or 200SMA or what ever. I make an assumption that if price is above the 200 SMA and then goes down it will retract to the SMA and bounce up again. Thats the assumption. So I look into future and I test this assumption. If it has a statistical edge I'm glad and I trade it. I don't think well I can reduce the lag by referring to 100 SMA or 5 SMA...
Its like you say that the sun rises in the east and travels through the sky every 4 minutes the distance of it diameter. Thats what I see and its good for my purposes, to know where the sun will be in 2 hours. Now you come in and say, I was taught in 5 grade that the sun is not traveling through the sky, but the earth moves. You may be right but for the purpose of knowing where the sun will be in 2 hours my point of view is better.

Hope it makes sense.

Baruch

None what so ever to be honest with you.

Your original point was there is no such thing as lagging indicators right? It seems you are back peddling now and saying that they might exist but you just don't care? Your point seems to be a moving target?

Here (again) is a lagging indicator in TS

Plot [-1] (Close);

Q.E.D.

Another one, a 'floor trader pivot', plot on daily chart though 'works' on any chart.

plot ((H[1]+L[1]+C[1])/3);

As you can see it lags by exactly a day that's not to say it's not a useful indicator.

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  #44 (permalink)
 baruchs 
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NickA,
My point was, is, will be that all indicators, price patterns and every thing else in TA is based on past data. (If you have an indicator based on future data, I offered to pay 100K. Its in USD).
The point is that you should not look and care how an indicator is created, but look how price behaved from some intersection (or other objective point) with the indicator in to the future. As in the example in previous post.
I don't want to repeat my self so all the arguments you can read from my previous posts.

Baruch

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 NickA 
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baruchs View Post
NickA,
My point was, is, will be that all indicators, price patterns and every thing else in TA is based on past data. (If you have an indicator based on future data, I offered to pay 100K. Its in USD).
The point is that you should not look and care how an indicator is created, but look how price behaved from some intersection (or other objective point) with the indicator in to the future. As in the example in previous post.
I don't want to repeat my self so all the arguments you can read from my previous posts.

Baruch

That is quite different to what you said in your first posts. What you say above is far less contentious. It is also expressed as an opinion rather than a cold hard fact. Whether I agree with it or not I would certainly not argue with that Looks like we have convergence here

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 ronan2505 
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I was simply stating an indicator is a instrument which indicats what may happen in the future, but not always right!

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 websouth 
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baruchs View Post
NickA,
My point was, is, will be that all indicators, price patterns and every thing else in TA is based on past data. (If you have an indicator based on future data, I offered to pay 100K. Its in USD).

Baruch

I submit a simple 9sma on a CL chart. That is based on "future" data per your request. CL is a future contract. I accept Paypal. I would prefer Euros as the dollar is not worth what it used to be...


side note re: all indicators, price patterns and every thing else in TA is based on past data - I think we have agreement in this thread I was getting worried....

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