(The Home of Adaptive Indicators)
On this site you will find many indicators that are used to provide indications of price action to help trade the equity markets.
- Many of these indicators have been written so that they adjust the period used in their calculation to be equal to the dominant period of the changing prices in the markets. We believe this to be one of our major selling points.
- There are also indicators that adjust their properties based on the measured recent volatility: moving faster as volatility increases, and slowing down as the market stagnates.
- Other indicators are designed to show when markets are turning or stagnating. There are many other indicators available elsewhere that purport to do the same, some admirably, and some abominably. The indicators here use some novel concepts not generally used elsewhere. These concepts generally have a sound mathematical basis, derived from digital signal processing and/or statistical concepts.
Click on the header text to expand/toggle the sections below.
What do indicators do? They indicate. What do they indicate? They indicate what the market has done, and where it is. That is it. Nothing more. Indicators, of themselves do not predict where the market will go: that is a human imposition of order on an unpredictable phenomenon, using historical interpretations. That having been said, indicators often are used to confirm market action after it has occurred, and ride the next wave so to speak.
As an example, look at any momentum indicator, and you will see that momentum wanes before the market turns. Does this provide predictive power? Of course not. How many times have you taken a position based on momentum reversal, only to have the market rip back in your face? The key to understanding why momentum wanes before a turn, is to realize that momentum measures the speed at which the market is moving. Just as with anything, the market usually slows down before it turns. Hence you see the reversal of momentum first. Far better to use as confirmation is a divergence in momentum and price action. If momentum turns, then reverses to its original direction, but does not go as far as price does in the movement, then another reversal might well be confirmation of a turn.
As to whether a turn marks a reversal or a consolidation depends on the market state. In a strongly trending market, it may only be a consolidation: in a ranging market, it may well be a turn. There are many methods that traders use to determine if the market is trending or ranging/channeling. We use our Osi Cycle-Trend Discriminator. You may want to go to the indicator description to see how it works.
For further discussion of indicators and how they act, read the articles on the site; and the descriptions of the indicators.
Next let us examine one of the basic problems with market indicators.
Most of the market indicators available elswhere in the market have one overriding problem: they are calculated over a fixed period that never changes, no matter how the market behaves. Determining the optimum period to use for calculations becomes a matter of convention, convenience or luck. One question that might be asked is: what would happen if we could automatically adjust the calculation period to be based on the period of the dominant cycle at any given time?
This site has many indicators based on just such a method. This link points to a qualitative discussion of the mathematical basis of such indicators. There are also many other types of indicators, many of them calculated on a fixed period, because that is what makes the most sense in those scenarios.
Indicators can be made adaptive by adjusting the calculation period based on the period of the dominant cycle, or by adjusting the calculation based on the volatility over a period. If adjusting for volatility, obviously, the period over which volatility is being measured can be the dominant cycle period. Therefore, in such a case, we usually make it a parameter to use either a fixed period or the period of the dominant cycle, effectively making such indicators actually adaptive to both the dominant cycle and volatility. Obviously, only some indicators can be adjusted depending on volatility. So it makes sense to adjust a moving average, based on volatility, but not a momentum-type oscillator, as these are already ipso facto based on volatility in the first place.
We call them Cycle-Adaptive Indicators and Volatility-Adjusted Indicators respectively.
There are other types of indicators that it makes no sense to adapt for cycle period or volatility, as the indicator action is independent of either factor. This is especially true if the indicator involves no averaging. There are also situations where even if the indicator involves an averaging process, it may provide no benefit to try to adapt the indicator to a dominant wave period or even volatility. There are quite a few such indicators also available from us.
To access fuller descriptions or to purchase indicators, use the Online Store or Resources tabs on the menu at the top of this page, or just click here to go directly to the store.
A Word About Indicators