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I just got an early release copy of a new MS add-on called ICE.
Before reviewing the product, here's a disclaimer for all the
conspiracy theory compulsives out there. I have no involvement with
either Equis or Adaptick, the company who produces the program. I'm
not married to the sister of someone who works for either one of
them, and nobody there is my cousin. They don't send me birthday
cards with money inside, and so far neither of company has even
bought me a hot dog.
The product's name is ICE, which tells you absolutely nothing about
the program. I will say this: I REALLY LIKE THIS ONE!
I haven't said that often about any add-on but this time, I really
got my money's worth out of it.
ICE is a specialized system tester program that takes 72 indicators
and divides them into four relatively uncorrelated categories. The
indicators in each category can be tested on, and optimized for, any
group of stocks in any time frame.
What this product does is save huge amounts of time and energy when
building and testing trading systems.
All trading systems rely on some kind of indicators. However, if you
are going use two, three or four indicators, each indicator should be
measuring something different. For example, if you like RSI and
Stochastics, fine. Just don't put both of them in your system because
you are essentially measuring the same thing with both indicators.
Both are momentum indicators. RSI measures closing price relative to
the previous close, and Stoch measures closing price relative to the
range. This might sound different, but they're too closely correlated
to be very effective when used together.
In the ICE program both of these are considered velocity indicators.
The point of having different indicators is to increase the
probability of a good trade by increasing the amount of NEW
information provided by each indicator. If the indicators are too
similar—measuring essentially the same thing—the combination only
marginally increases the probability of making a better trade. If the
indicators are sufficiently different, then the new information makes
a larger and more important contribution to the increase in
probability of a good entry or exit point.
However, that's not the end of the story. Even if you have indicators
that have very little colinearity (okay, take deep breathes—it means
they're measuring the same things—i.e. Points on a straight line.)
there is still the issue of how well any given indicator works on a
group of stocks.
In a good trading system all the indicators give good signals on the
stocks being traded, and they are distinct enough to provide sound
entries and exits when used together.
(I need to pause for a moment to make a small point outside of ICE.
With indicators, more is not merrier. The best trading systems keep
it simple. As you add more and more indicators to a system, the law
of diminishing returns sets in and JO's law of paralysis takes over.
If you use more then 3 or 4 indicators, it gets progressively harder
to make decisions based on what you're seeing. Half the time you
won't even know what you're seeing, much less what to do about it. So
basically---KEEP IT SIMPLE!!!!)
After installation, ICE is fully integrated with the systems tester.
You pick a couple of indicators in a category, test the indicators on
your stocks to see which ones perform the best, and then optimize
them. The optimizations are also fully integrated, so you don't have
to do any programming at all.
Once you have the optimized indicators, you set them up on chart with
a stock and play around a bit with the settings. This how I like to
customize. My eyeball tells me things that a mechanical optimization
program can't even deal with. Once that's complete, you move to the
next indicator in the next category.
After awhile you will have three or four indicators, one from each
category, that fit you, your stocks and your system. They will have
little colinearity, they will have excellent probability of
generating good entry and exit points and you will be well on your
way to having a really good trading system.
No, the program doesn't test chaos theory, Elliot cycles, fractals,
or hypocycloids of four cusps. This is a good thing because it has
been proven over and over, the best systems use the simple time
tested indicators--and that's it. Two moving averages and some common
sense will out perform the stuff I just mentioned. Okay, don't email
me about how good Elliot cycles are and how much you love them, etc,
etc. Elliot was stranger than Elvis, and Elvis didn't know anything
about trading stocks. That's all I need to know about Elliot and
Gann.
This program won't help you write rap music, or find exotic patterns
in the futures markets, but it will save you tons of time and money
trying to come with a system that works.
Here's a real life example—mine. I have written and developed two
really, really good systems. (No, I won't give them to you. No, I
won't sell them to you. Don't bother!) But like all Americans (and
the Chinese too), I'm never happy with what I have, so I wanted a
third one that did something that my first two didn't. My original
systems gave very accurate entry and exits signals but they didn't
tell when I should be piling more money into what looked like a good
trend. While it's not possible to tell how long a trend will last, it
is definitely possible to tell when a particular trend is stronger or
weaker. In other words, when should I risk more or risk less.
I started working on the system a couple of weeks ago, and went about
solving the problem of when to increase my trade risk first. After
that was solved, the indicators that I added initially to the system
seemed to perform only so, so. After getting ICE, I read the manual
(which is still a work in progress, but since none of you seem to
read manuals anyway that shouldn't be a problem), sat down at the
computer and in less than two hours finished the system. I've set it
up, traded with it, and I'm pleased to say---I LOVE THIS SYSTEM, I
REALLY LOVE THIS SYSTEM. Next week I'm going to buy it a three stone
diamond ring, I love it so much. Now, if it could only tell me it
loved me back!
If I had had this product a few years ago, it would have saved me
hundreds of hours in system development and testing time. That was
such grinding work, I had days when I thought I saw Elvis—sorry I
mean Gann.
You know the only thing that could be better than this is if I could
tell you it was FREE, FREE, FREE! That is, after all, your favorite
word. Alias, it's not. BUT ALMOST.
If you buy it before the official release date, it's only $99 instead
of $299. Well, hold my hand, I can't believe it. It's true, and I
will tell you I would have paid many times that amount for all the
time and energy it would have saved me when I first started
developing my own systems.
You can read about it at www.adpatick.com.
I guess before I finish I need to confess. No I'm not John Slauson,
the guy who wrote ICE. Yeah, I know JO is really similar to JS—at
least to some of you Sherlock Holmes want-ta-be's. Given the millions
of possible name combinations JO and JS aren't even remotely
related.
My confession is about cycles. I do rely on some cycle information.
You can find it at http://www.fourpillars.net/finance/predic.html.
This is the most accurate cycle information I've ever seen. If you
don't believe me, use it for awhile. You'll see. I've named my dog
Yang.
JO
PS Some of you know I recommend John Clayburg's book Four Steps to
Trading Success. John has developed a very sophisticated, effective,
yet easy to use set of indicators based on the RSI, Stoch and %R. It
would seem that these have too much colinearity to be effective. Doc
Clayburg has solved that problem through the use of time frames. Time
frame combinations can over come colinearity problems, but it's too
sophisticated for most system developers to deal with so I won't go
there, except to say Clayburg's system does not suffer from the
problems I have described above.
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