A View on Technical Indicators and Trading Systems
In this multi-part article, we describe some common technical indicators and their traditional interpretations. We describe a scoring system based on the interpretations of those traditional technical indicators, and also a scoring system based on statistical analysis using the same indicators. We demonstrate the predictive ability of each of the two systems, and how the two are related. These two scoring systems are highlighted in the Weekly Technical Status Report. Specifically, we show how well each does in predicting price changes 20 days forward for 100 stocks over 1,000 days of market data. We then present, test, and discuss 15 different trading systems. We draw several conclusions about technical indicators and trading systems from these results.
Continue to part 2 - "Common Technical Indicators and Interpretations"
Contents: A View on Technical Indicators and Trading Systems
- Common Technical Indicators and Interpretations
- Moving Averages of Closing Prices
- Wilder's Relative Strength Index (RSI)
- Moving Average Convergence/Divergence (MACD)
- Two Technical Indicator Scoring Techniques
- Predictive Value of Technical Scores
- Simple Trading System Performance
- Moving Average Crossover Trading Systems
- MACD Trading Systems
- RSI Trading Systems
- Systems Using the Traditional and Statistical Scores