The Holy Grail Indicator

Now that I have your attention, THERE IS NO HOLY GRAIL.

When I first started learning about technical analysis 6 months ago, I was amazing at how many indicators existed.  My thought was to keep it simple and start backtesting to find out which indicator would make me a million dollars.  Being relatively naive, I thought there was one that existed, I just had to find it.  After doing backtesting on numerous indicators, I realized that I was wasting my time.  I came to the conclusion that if I relied on an indicator to give me buy and sell signals, I wasn’t going to be doing this long.

The more seasoned traders that are reading this know what I’m talking about.  I want to bring this to the attention of absolute beginners only.  I am NOT saying that you should stop trying to find the holy grail or do backtesting.  These are all great learning exercises that can only be beneficial to your trading.

I like to experiment with formulas and backtesting because though there isn’t any 1 standard indicator that can make you money, there are people out there that are making money with a complete trading system.  They have been able to automate this trading system so that income is automatically generated for them.  Brian’s post today mentions how incorporating 1 from each of the 4 category classes, "diversity and robustness are increased." 

Just for fun, I wanted to see how the Stochastic indicator buy/sell crossovers on the USD/JPY would have performed over the last 7 years.   I started with equity of $10,000.  Click thumbnail below for a graph of the equity curve.

Stochastic backtesting 






One Response to “The Holy Grail Indicator”

  1. Ludovic on January 4th, 2007 4:29 pm

    true! the holy grail is you and yourself only : your strat ; your discipline ; your MM ; and your guts to stick to this. there should be a balance in the amount of indicators you use, like news you take in, like lots you trade… all is about balance and discipline … indicators they all bring the same amount of info once you have been around…good luck and pass it on.

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