Forex

Indicators can be designed that adapt automatically to changing
market conditions, such as volatility, the variation in volatility, and
cycle or trend lengths.
Studies have shown that optimization of simple indicators and
systems, generally speaking, does not work. Optimization is the process
of back-testing a system over historical data to determine the
precise values for its parameters that, historically, produce the most
profit. Optimization assumes that what worked in the past will work
in the future. In reality, the market breathes and moves and expands
and contracts in such a way that the cycles and volatility change.
Thus, any system optimized for a certain set of market conditions
over a small number of commodities or time-frames is not particularly
effective. A system that works over a long time-frame must
be either a blunt instrument system that requires diversification
to limit risk or a highly accurate system that automatically adapts
itself to market conditions and, through such adaptation, reduces
risk. Many traders are not in a position to trade a “basket” of commodities.
They are either employed to trade a small number of commodities
or do not have the capital, as private traders, to diversify
Therefore, to achieve a highly accurate, lower-risk trading style
suitable for trading a small number of commodities, the accuracy
of one’s techniques must be improved. This is accomplished by improving
the mathematical and logical bases for such techniques, In
this context, we use diversity to minimize risk by trading multiple
time-frames, using more complex and statistically accurate technical
analysis without increasing the strain on the trader performing
such analysis.
To do this, we must make full use of the power and computational
speed of PCs available to us, not only to analyze market information,
but also to condense it into a more utilitarian format for the trader.
We must also increase accuracy by designing indicators that adjust automatically
to market conditions and by fine-tuning traders’ timing,
i.e., when to enter a trade and, even more critically, when to exit.