Setting the proper period on an indicator
Setting the proper period on an indicator
Many technical analysis indicators are standardly set on 14 periods, but I was wondering if adjusting the period could make a significant difference for a correct trade.
How much does a proper period matter for you, and how do you properly set it?
P.S.: which could be a proper period for a day trading strategy?
P.S. n.2: would be great if somebody could share his strategy, just to see a practical example.
There is no golden rule to it, the best strategy is based upon hit and trial, to be honest, 80% of traders use all the indicators on default settings and have been doing pretty well using these settings only, but tweaking indicators might help you in getting some early triggers but obviously as the number of triggers would increase the profitability from each trigger would definitely go low, traders make this compromise and adjust their Risk/ Reward accordingly to make sure that they are in a correct trade, also no one would give their holy grail if they have one because if you share a trading strategy with someone, it really stops working. this is a great rumour in the trading community and everyone really obeys the rumour.
That is a correct approach if you are a very quick trader, if you plan is to buy it and sell it within an hour then you should definitely consider putting it as short as possible and including as many points as possible at the same time. However if you could wait a bit more then you could take it a bit bigger as well, like for example you bought today and max you can wait is until tomorrow? Then you can enlarge the period as well, whereas if you bought it today and can sell it anytime within a week? You could take it in a huge margin.
So, it depends on when you buy it and when you want to sell it and generally you make it linear, shorter the trading period shorter the indicator checking period as well. I personally deal with 1 hour because I just like to trade within a big margin, all those 5 minutes mean nothing to me because it would require me to constantly check it.
I’ve considered this before and then just thought it wasn’t very useful because you can just change the price interval of the chart you’re using instead.
Back to the question, I’d lean to getting as many points as possible (especially on shorter timeframes) – but this might depend on eyeing the chart for each individual currency and seeing how long it takes to break down/up normally and adjusting your indicators accordingly (perhaps trying full time, half time and 2/3rds). Once you’ve got an idea, you could also go back a few days/months to test it out and see how well it looks.