by Joe Duffy
ABSOLUTE PERFORMANCE INDICATORS
Only Trade What Works!
The statement “a trader should only use indicators that work” would seem quite obvious ---- in fact not only obvious but perhaps utterly preposterous to think that any trader would do otherwise! But do traders do otherwise? Do traders use technical information that they have not tested? Do traders use technical indicators without any hard evidence that they provide any advantage whatever in forecasting markets? Are technical indicators even any help at all .... do they work?
The visually intuitive and empirically tested SCOUPE INDICATOR.
The Problem with Technical Indicators
The large problem in evaluating technical indicators without hard empirical tests is often our eye sees what it wants to see. This is exacerbated by the fact that markets can really only go up or down, and can only either trend or range trade. Hence any indicator is going to look great sometimes just by the virtue of these limiting circumstances. This is the big problem with believing something about the market based on a few occurrences of anecdotal visual “evidence”; it can fool you into believing something that will not be borne out over the long run. And the problem with that of course, is if you are trading with tools that are not proven to provide an "edge", how can you possibly expect to use them to make a profit?
New Concepts in Technical Indicator Design
JD Trading Systems introduces original technical indicators and systems that provide verifiable, historically tested edges to further successful trading strategies. There is nothing that compares to these tools regardless of price. The Absolute Performance Indicators package consists of "Scoupe", “Trend & Retrace”, and the "API Stock Market System".
The reason these indicators are unique is because evidence based “absolute performance” is the measure of the value of these indicators. Before using any indicator as part of a trading strategy, our requirement is that there is proof the indicator will provide a verifiable edge in historical testing. A proven verifiable edge that is necessary for success!
Finding an "Edge"
Any technical indicator needs to provide a tested, quantified, and verified "edge" to be useful in trading. An "edge" is the discovery of market character or behavior that has provided a measurable advantage in empirical testing. No sustainable success is possible without an entry edge.
The entry edge is the key component to success. One cannot have sustained success solely through "position sizing" or "money management" without an edge. Only after one has an edge can one work on better exits to help exploit the edge. Exits can not turn an entry with no edge into a success over the long run.
Finding an edge is a very difficult process. The market is very often the antithesis of human nature. Therefore experience in both trading, and in the processes of back testing, forward testing, and validating are all necessary to come up with a potentially sustainable trading "edge".
We use simple bare bones modelling for back testing indicators to verify an edge. This means there is no more then one optimizable parameter per test model.
Though some of our models could be considered complete trading systems our tests are designed first to quantify and verify an edge. A complete system is not always required to do this. This is especially true for day trading.
All of our model rules that we used for testing are fully disclosed, most of them right on this website. This means the test logic is fully explained such that one can construct a system test, import the indicator into the system test, and run the exact same tests according to the exact same rules we do.
We do guarantee that all model tests that are described on this website can be run by the user and will achieve the same results shown here, subject to any differences in data, which should be negligible.
We set out to design indicators for our own use with three principles in mind. First there had to be some empirical evidence that the indicator provided a verifiable "edge". An edge is simply the advantage the indicator gives --- in Vegas the house always has the "edge". We needed to be the house plus some.
Second, indicators had to be visually appealing and intuitive on the screen. That meant minimal screen clutter. Ultimately we are trading price, and we wanted to be able to see price.
Third the indicators had to be unambiguous, and very easy to interpret while the market is trading. We can only process a limited amount of information on the fly, so we wanted clear information that was immediately and visually intuitive.
All of the Absolute Performance Indicators feature these attributes. Additionally there are no optimized parameters in the indicators. As the indicators are designed to identify opportunity on any market/ any time frame, no optimization is necessary.
Scoupe keeps you out of the "slop" like at the left most portion of the Crude Oil chart above, and is designed to find low risk, high probability entry points in sync with the market. Above is the Scoupe Set Up, with entry points.
REQUIRED U.S. Government Disclaimer
NOTICE: HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE IS THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE SUCCESS. DO NOT TRADE WITH MONEY YOU CAN NOT AFFORD TO LOSE. ALL ASSET CLASSES INCLUDING FUTURES, OPTIONS, FOREX, ETF'S AND STOCKS HAVE LARGE POTENTIAL REWARDS BUT ALSO LARGE POTENTIAL RISKS. YOU MUST BE AWARE OF THE RISKS AND WILLING TO ACCEPT THOSE RISKS IN ORDER TO INVEST. ALWAYS CONSULT A REGISTERED FINANCIAL ADVISOR BEFORE TRADING OR INVESTING TO DETERMINE IF THE INVESTMENT IS APPROPRIATE FOR YOU. THIS WEBSITE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SOLICITATION TO BUY OR SELL ANY ENTITY MENTIONED.