Saturday, July 7, 2007

Making a Predictive indicator

Hi All,
As you all might be aware, most of the indicators available out there are lagging indicators, i.e. they lag the price and they always tell you what has already happened and not what is going to happen. This the major drawback of all indicators. It would be great to have an indicator which would tell you what is going to happen in the next time frame. Recently, efforts have started to be made on making predictive indicators but i am not too sure of how successful they can be.

I always believe that all indicators, EAs etc. should be based on price action and simple mathematics rather than any complicated strategy. Its not that lot of traders sit with complicated mathematical systems and then trade the market. Most of the professional traders and banks simply trade what they see, that is, they trade the price action. So i feel that any indicator should take care of the price action and simple maths. I believe that fibos could give us a good idea of predicting the market but they too tell us possible points at which the price can stop but they dont tell us which point is mostly likely to be the stop point. Elliott waves too tell us only the possible stop points and not the exact stop point.

Last few days, i have been trying to come up with some idea for making a predictive indicator but i have been unsuccessful so far. I would like to welcome any ideas from anyone for such an indicator. If some good idea comes out, we can maybe try and make an indicator based on that. Lets try to keep the maths simple, maybe we could use probability theory as well but i guess there should be some way to predict the close price of the next time frame atleast within a range of 10 pips. Lets see what comes out as we continue our search.

Happy Trading!!

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