Will my indicator-based strategy ever stop working? | Forex Factory

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Will my indicator-based strategy ever stop working?

  • #1
  • First Post: Jun 27, 2018 5:55am Jun 27, 2018 5:55am
My strategy is based on several standard indicators (not custom, but indicators that are integrated in MT4 like MAs) and a bit of price action (mainly pinbars and engulfings). I am aware that no one can predict the future, but perhaps someone could predict it close enough. My question is:

Will my indicator-based strategy ever stop working?

Raw price action strategies will always work, but let's assume that my indicator-based strategy yields a winning rate of 70% (made up number). Since I have my edge, I plan to use it for the next 40 years but since it is indicator based, I am worried that the winrate will slightly reduce each year or each few years or so until it completely stops working.

Would that be possible? It's scary to think about it. And would it make a difference if it's custom indicators that calculate something specific? I am a bit confused how to look at this issue ... if it's an issue of course.

Feedback would be appreciated.
  • #2
  • Jun 27, 2018 6:58am Jun 27, 2018 6:58am
Quoting RaysJourney
My strategy is based on several standard indicators (not custom, but indicators that are integrated in MT4 like MAs) and a bit of price action (mainly pinbars and engulfings). I am aware that no one can predict the future, but perhaps someone could predict it close enough. My question is: Will my indicator-based strategy ever stop working? Raw price action strategies will always work, but let's assume that my indicator-based strategy yields a winning rate of 70% (made up number). Since I have my edge, I plan to use it for the next 40 years but since...
It can stop working anytime and the reason would be that any forex trading indicators formula is based on calculating how price has already behaved in the past and this can change at any time.

For inventing or creating any profitable system it should be based on the natural laws of the market.

In essense a trader should know beforehand why his trading system has worked in the past.

Most people test certain algorithms,indicators,trading systems based on how it has performed in the past and they assume that the same thing would repeat in the future.Which in most cases never happens because they do not know why that particular system has worked in the past.

They become victims of confirmation bias.

To develop a system which would be robust and work in all market conditions should be based on the natural law of the markets.
No one ever Discovered anything new by colouring inside the lines.
  • #3
  • Jun 27, 2018 7:03am Jun 27, 2018 7:03am
Quoting Hdhorda4
{quote} It can stop working anytime and the reason would be that any forex trading indicators formula is based on calculating how price has already behaved in the past and this can change at any time. For inventing or creating any profitable system it should be based on the natural laws of the market. In essense a trader should know beforehand why his trading system has worked in the past. Most people test certain algorithms,indicators,trading systems based on how it has performed in the past and they assume that the same thing would repeat in the...
I get your point somehow, thanks for sharing your thoughts.

Counter questions:

What makes you think that a standard indicator, like the moving average or an RSI will lose value in the future? You believe price movements will be SO different (but it still calculates the same periods, for example 20) that it will just get worse? And if you think it will, what are the chances that it gets actually better?

If we take the RSI as an example, which I use in my strategy, then how will it be different in like 20 years and how can it make my strategy worse?

I'd like to start this discussion just to conclude for me how I shall proceed in my Forex journey.
  • #4
  • Jun 27, 2018 7:07am Jun 27, 2018 7:07am
Quoting RaysJourney
{quote} I get your point somehow, thanks for sharing your thoughts. Counter questions: What makes you think that a standard indicator, like the moving average or an RSI will lose value in the future? You believe price movements will be SO different that it will just get worse? And if you think it will, what are the chances that it gets actually better? If we take the RSI as an example, which I use in my strategy, then how will it be different in like 20 years and how can it make my strategy worse?
RSI and MA will never lose their value! They couldnt possibly have any LESS value. https://www.forexfactory.com/blob:ht...8-d1d23285851f
  • #5
  • Jun 27, 2018 7:12am Jun 27, 2018 7:12am
Quoting MLeslie
{quote} RSI and MA will never lose their value! They couldnt possibly have any LESS value. {image}

The link does not work. I agree, yet I am asking others to confirm it because I am unsure. I've heard many things and theories, but I am open-minded and have an ear to listen and to learn in case MAs and RSI could lose values.
  • #6
  • Jun 27, 2018 7:16am Jun 27, 2018 7:16am
Quoting RaysJourney
{quote} I get your point somehow, thanks for sharing your thoughts. Counter questions: What makes you think that a standard indicator, like the moving average or an RSI will lose value in the future? You believe price movements will be SO different that it will just get worse? And if you think it will, what are the chances that it gets actually better? If we take the RSI as an example, which I use in my strategy, then how will it be different in like 20 years and how can it make my strategy worse?
I think it wont make your strategy worst and it wouldnt lose any value in future but it has been already tested that trading with indicators such as rsi,moving averages and stochastic the results will most likely appear to be random i.e sometimes profitable and sometime it will incur losses and would display a bell curve shape like graph in a trading simulation test if performed for atleast 500 trades minus the spread ofcourse

What i mean is you will see in the long term [around about 1000 trades] that your profits and losses will almost equally distribute on a scale of 50;50 winners and losers with a risk reward to 1;1 minus the spread.with the exceptions ofcourse.
No one ever Discovered anything new by colouring inside the lines.
  • #7
  • Jun 27, 2018 7:18am Jun 27, 2018 7:18am
Quoting Hdhorda4
{quote} I think it wont make your strategy worst and it wouldnt lose any value in future but it has been already tested that trading with indicators such as rsi,moving averages and stochastic the results will most likely appear to be random i.e sometimes profitable and sometime it will incur losses and would display a bell curve shape like graph in a trading simulation test if performed for atleast 500 trades minus the spread ofcourse What i mean is you will see in the long term [around about 1000 trades] that your profits and losses will almost...
I think there is a misunderstanding. I totally get your point now, but when I mentioned that my strategy is indicator based with a bit of PA, then I meant that there is a pattern I follow that needs to meet certain criteria to enter. Most of these criteria are indicators plus a bit of price action.

My strategy is not a MA crossover + stochastic and then buy/sell. This was maybe my bad not explaining properly.

Do you still think it could lose value?
  • #8
  • Jun 27, 2018 7:22am Jun 27, 2018 7:22am
Quoting RaysJourney
{quote} I think there is a misunderstanding. I totally get your point now, but when I mentioned that my strategy is indicator based with a bit of PA, then I meant that there is a pattern I follow that needs to meet certain criteria to enter. Most of these criteria are indicators plus a bit of price action. My strategy is not a MA crossover + stochastic and then buy/sell. This was maybe my bad not explaining properly. Do you still think it could lose value?
Thats what i said if it is based on a pattern and price action trading system than it wont lose its value because price action trading will always work.
No one ever Discovered anything new by colouring inside the lines.
  • #9
  • Jun 27, 2018 7:27am Jun 27, 2018 7:27am
Quoting Hdhorda4
{quote} Thats what i said if it is based on a pattern and price action trading system than it wont lose its value because price action trading will always work.
Thanks for the lovely discussion :-)
  • #10
  • Jul 31, 2018 2:50am Jul 31, 2018 2:50am
One of the reasons I didn't use non-standard indicators is that I worried whether they were future proof or not? If I built a trading career on MT4 indicators what would happen in a future where MT4 was no longer? Some of these indicators don't even have the source code available so for many they'd be back to square one.
  • #11
  • Jul 31, 2018 5:20am Jul 31, 2018 5:20am
Quoting plymgary
One of the reasons I didn't use non-standard indicators is that I worried whether they were future proof or not? If I built a trading career on MT4 indicators what would happen in a future where MT4 was no longer? Some of these indicators don't even have the source code available so for many they'd be back to square one.
So, your major? Price action or fundamental only? Thanks in advance.
  • #12
  • Last Post: Jul 31, 2018 5:27am Jul 31, 2018 5:27am
Quoting MariaEduard
{quote} So, your major? Price action or fundamental only? Thanks in advance.
Hi. Well, I'm still learning myself so don't rely on what I say! But currently I'm using:

50SMA, 20SMA, Fibs, and price action. I've attached my plan if you want to use it as a guide for your own. No idea if it'll be profitable yet - early days with this one.
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File Type: docx Trading Plan2.docx   22 KB | 546 downloads
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