Evidently, it is impossible to find technical analysis indicators that are always have the best predictive abilities in all cases. According to statistical researches, depending on time-frame, market conditions, industry, type of stock or ETF, and other factors, onetime some indicators might be best but other worst, and vice versa. In general, in terms of comparative analysis, utmost only average numbers can be considered. As example, according to average predictions success based on the statistics during 2010, the five of top winning indicators are: Relative Strength Index, Money Flow Index, Twiggs Money Flow, On Balance Volume, and Directional Movement System.
Therefore, it is better to select somehow the best indicators for a particular case. However, it can be a time-consuming process. One of the solutions is to allow a computer program to decide which indicator should be trusted more and another less for particular market conditions and a specific shares using back-testing. Such computer program could compose the forecast with weights accordingly to predictive ability of each technical indicator. The example of such program is Technical Analyzer TA-1 (TA). It uses technical analysis module which is based on Neural Network.
The recent researches showed that predictive abilities of some classical indicators can be improved by an additional transformation. In short, if an indicator is trend-differentially coupled with price – it demonstrates better predictive abilities than a pure indicator. This idea has been used to improve a new release of TA software. The list of existing indicators in TA Technical Analysis module has been empowered by two new divergence-modified indicators – Relative Strength Index (RSI) and Moving Average Convergence/Divergence (MACD). These two indicators have been transformed to a slope of line and differentially-coupled with a price line slope. Indicator and price transformation to line slopes has been performed using Least Squares Linear Regression within a sliding 10-day period (moving window).
Free version of TA is available on Addaptron Software download page