All Ords Index.

[trackers]

Hi guys,

Well a couple of things. Firstly, Phaedrus never gave anyone his formula. He did however point out the components of his formula on a few occasions, and I spent a hell of a long time working out how to code Metastock to pull them together into a points system and one common indicator - Luckily, I came up with it long enough before he stopped posting that I could see that it was identical as time went on, and he confirmed a couple things with the Expert Advisor to me in a PM, and I also told him to let me know if he had an issue with posting it in his absence.

Hoop, you're right, when it first was created it was something like 5 indicators, with two variables per indicator and an overall average, but ended up being the average of 50 calculations (and maybe slightly higher but with no discernable difference) - You could make it more responsive by leaving out the longest 5 or 10 calculations I guess

He also confirmed to me in a PMs that backtesting for profitability was ultimately *the* way to come up with an indicator, and of course that makes sense. You do this by backtesting a bunch of standard and custom indicators (using variable time periods, and variable parameters) over the market (or individual stocks, or whatever), over a large enough period of time, and see which are the most profitable.

As he did this, obviously a couple rose to the top (they did for me too), and then he made some custom indicators which cobbled a few of these together and backtested again, and the custom indicator outperformed the indicators in isolation. Easy

The thing is though, the last time I talked to him was almost 4.5 years ago. If he backtested the MSI now, versus all the other common indicators available, with the benefit of having an extra 4 years data... Would the MSI still outperform everything else? Well, it is a great indicator that is for sure that is extremely safe and really stood the test of time, but the answer is definitely not certain, and that's why other indicators should always be considered (at least in combination). You also have to consider a number of other things when thinking about an ultimate indicator (and Hoop a lot of this is what you're saying and I agree):

1. The most profitable may involve far too many trades, and even though from a pure monetary sense it results in the most $$ at the end (system includes customisable trade fees), if there's a system that's close but has a fraction of the trades, its probably better
2. Winning versus losing trades. If the most profitable system has only a few winners, but those winners are massive, if there is another system that is close but has a better win %, that is probably better
3. What stocks are you backtesting against? Small caps? Everything?
4. How far are you backtesting. what if you backtested against different time frames? Would the best performing indicator still outperform

etc

Recently I backtested everything (MSI, stoch, all the usual suspects) against 50 stocks in the ASX 200 going back a year. Stoch significantly outperformed everything else. That's a very short time frame, and a very small number of stocks, but as a quick bang up in 2 seconds indicator that'll *most likely* produce a reasonable result in the current environment, it seems pretty good (and Stoch is a component of MSI as Hoop correctly says) - A lot more work needs done though