Bulletin 7 Indicators Ad Infinitum

The Traderclub Forum: Traders Club Bulletins: Bulletin 7 Indicators Ad Infinitum

David Elden (Admin) on Thursday, February 11, 1999 - 10:58 pm:

Chuck LeBeau's System Traders Club
BULLETIN Vol. 1 Number 7 Oct. 6, 1998

Table of Contents:

Article by Chuck: Indicators Ad Infinitum
Useful URL's regarding; Bulletins from Omega, re; y2k compliance, CBOT New Project A, Daylight Savings Time and Omega Server
Letter from Glen Larson re: continuous contract CD refresh at no charge
Chuck's Seminar Appearances: Raleigh, NC. Oct 23-25 & Las Vegas Nov. 20-22

I frequently receive messages asking for my opinion about the relative value of this new indicator vs that new indicator. I am very flattered by the assumption that I can immediately rank all the known indicators on a scale of one to ten and then provide meaningful insight on their relative value. Those that ask for this information are sometimes disappointed when I am unable to respond appropriately by perhaps replying that I am certain indicator A is twice as good as indicator B. Unfortunately the truth is I do not spend much of my time researching new indicators nor do I believe that indicators can be compared in this fashion.

Regarding new indicators in general, in my opinion the world of technical analysis has too many indicators already and it doesn't need any more indicators without purpose. Everyone wants to add more indicators and more confusion. Why? I think that every new indicator should be required to come with an explanation of why it was created. What specific problem does it solve? Any new indicator that solves a particular problem should then be welcomed with open arms. Any indicator that was designed simply to be different is less than worthless. It does nothing but add to the existing confusion and serves to distract us from indicators that have proven value. Everyone should realize that in this business we keep score based solely on profits. There are no style points or bonuses for originality.

The new indicator questions I receive usually go something like this: "I just read about Joe Guru's new Joe Guru #62 which he calls the Joe Guru Upside Down Inside Out Infinitely Smoothed Fractal Precipitator with Semi Log Analysis and a Twist of Lime. Do you think this a good indicator?" (By the way, have you noticed that Gurus always have to put their names on their indicators. I think its just some Guru thing. Perhaps a grasp for immortality. In any case, let's forget about the Guru's annoying insistence on naming indicator after indicator after themselves and get back to trying to objectively assess the value of the indicator itself.) "Is it a good indicator?" was the simple question.

The answer, however, is not as simple as the question. For example: Do I think moving averages are good indicators? Yes, as trend identifiers and setups, I think they are wonderful. Do I think moving averages are awful? Yes, I have tested enough of them as entry triggers to state that they are indeed awful. I could go on and on, indicator by indicator. Most indicators are valuable when applied to certain limited tasks and also very poor at many other tasks.

We should keep in mind that indicators are not systems and they should not be evaluated in the same manner as a system might be evaluated. Indicators are nothing more than problem solving tools and there are many problems to be solved when designing a good system. Our favorite indicator may solve one of these problems perfectly but may have no value whatsoever when applied to the next problem. It is true that, in theory, you can take any indicator and make a system out of it. But the result, even with the best indicator, is usually a mediocre system. It seems to me that using this procedure assumes that you already know the answers without ever having defined the problems. Just for fun, the next time you are in the local drug store, go to the pharmacist and ask "What is your best prescription?" Tell me what kind of response you get.

Another aspect of ranking and comparing indicators is that indicators are difficult to test objectively unless you isolate their use to a particular function and then test them for their usefulness according to how well they perform that single function. For example you will remember that in our book we tested a lot of indicators as entry triggers and found that most of them were lousy. This doesn't mean they are lousy indicators. It simply means that they are lousy when used as entry triggers. Unfortunately most traders assume that the only function of an indicator is to use it as an entry trigger.

I think that if we begin to think of indicators as problem solving tools and not as systems they will begin to take on a new life and new meaning. There is no "best"or "worst" or "better than". There are trading problems that need to be solved and there are indicators that provide us a choice of solutions. The best indicator is the indicator that, at this moment, provides the best solution to the problem at hand. As we continue to put the pieces of our system together we will be faced with other problems and today's solution may not be the best solution for tomorrow's problem.

The next time you are building a system, don't start by asking: What indicator am I going to use? Instead begin by breaking down the trading process into a series of clearly identifiable problems. Then use your knowledge of various indicators to find the tool that does the best job of solving each problem. I'll bet the indicator you select is not going to be the super duper Guru namesake of the month.


Enclosed is a message from Sam Tennis (Vista Research and Trading) that I thought might be useful to many of our members.

To my special friends...

Below are the URL addresses for three questions (or perhaps answers) that might be of some interest to you. Please feel free to pass this message on to any friends who might desire this information..

There is also a message from Glen Larson, President of Genesis Financial Data Services, for anyone who purchased the historical data CD from Omega Research.

The Bulletins on the Omega web page...

Information on the Y2K compliance issue from the Omega Research Customer Support Manager.

The CBOT has added new Project A - Electronic Treasury Bond future symbols that will trade over Project A and electronically during the regular trading hours.

Daylight Savings Time & The Omega Server

Information on all of these important topics can be found at:



The following message was posted on our Forum page but I thought it was important so I am posting it again in the Bulletin to make sure everyone gets to read it. The original message was to Sam Tennis.

From: Glen Larson <GLarson@GFDS.com>
Subject: RE: posting
Date: Wed, 30 Sep 1998 16:00:13 -0600

Attention Omega Research Continuous Contract CD Purchasers:

Recently, Genesis Financial Data Services and Omega Research had a cross marketing agreement of the Genesis Continuous Contract CD. Due to several factors, this agreement was terminated.

Genesis had been sending corrections, data updates and software updates to Omega to be implemented in releases to the purchasers of the Continuous Contract CD. Since these updates were not implemented on any of the CD shipped by Omega, Genesis would like to replace the Omega/Genesis Continuous Contract CD at no charge.

Purchasers of the Omega Continuous Contract CD need to contact Genesis to obtain an RMA to return the original CD for the refresh. Users can reach us at 800-808-3282. When the user sends back the old CD, a refreshed CD will be sent out at no charge. The refreshed CD will be current when shipped. Returns must have a valid RMA or they will not be accepted.

Since we did not receive the names of the purchasers of the Omega
Continuous Contract CD, we would like to have this message passed around to persons who might have purchased the Omega Continuous Contract CD.

If any users have any questions, complaints, suggestions etc., please feel
free to contact me at glarson@gfds.com <mailto:glarson@gfds.com> .

Thank you for your time.

Glen Larson
Genesis Financial Data Services


Don't forget that I will be speaking at Dr. Van Tharp's Seminar October 23 -25 in Cary NC. near Raleigh. Hope to see some of you there.

The Seminar is entitled " How to Develop a Winning Trading System that Fits You" (Advanced Workshop) As a special benefit to Traders Club Members, mention that you are a member of the Traders Club and receive a $150.00 discount on the cost of the Seminar. For enrollment information and details go to Dr. Tharps website at



I will also be speaking at the TAG seminar in Las Vegas at the MGM Grand Hotel, November 20 thru 22 . Traders Club members attending will receive three free audio tapes. I will post more details in the next Bulletin. http://www.telerateseminars.com

That's the end of Bulletin #7

Good luck and good trading