Wednesday, February 8, 2012

Indicators and Timeframes

MarketSci has a short post on what they consider long, intermediate, and short term indicators and strategies. Most indicators can vary sampling periods in order to smooth them out to avoid false alarms. As indicated by MarketSci, the relevancy of different indicators does depend on the amount of data as well as the timeframe. However, with the advent of practical high-frequency data, it is no longer the case that smaller time frames necessarily implies sparser data. One could certainly be sampling weekly for a multi-year indicator and end up with less data than sampling ticks for a few minutes in high-frequency data. The guidelines seem to be that long-term is ruled by trend-following (e.g., moving averages), intermediate-term by mean reversion, and short-term by "noise" (their example is RSI).

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