I seem to spend a great deal of time watching the markets. I enjoy looking for patterns and coming up with new indicators to code. Even though this is an enjoyable and sometimes beneficial experience, I know i am not making the best use of my time. I have a tendency to play around with the code and briefly inspect the results of the modifications as compared to the recent price data over the past couple of days. This is an improper way to analyze the effectiveness of a new indicator or trading idea.
For instance, I probably spent about 2 hours last night "playing around" with some indicators I have been working on. The end result of my efforts is nothing. How can I measure progress if i have no measurable results for my research. In the academic world, I would proceed with my research to the point where I could accept or reject my hypothesis, often times performing statistical analyses. For some reason, I am not using the same methods to evaluate my trading ideas. Therefore, I am not getting the most out of my time. This is very frustrating. It is even more frustrating because I keep doing it each day.
I think the best way to put a stop to this is to conceptually design a strategy with a couple basic indicators, perhaps 3-5 indicators. Then I should practice day trading it or backtesting it (if possible) to see if there is any edge. If there seems to be an edge, then I need to evaluate each component of the the strategy. For example, if I am using a trend filter, I need to determine if the likelihood of the the price data showing gains when the filter indicates and up trend and vice versa for downtrends. If I know that information, I have a starting point for making modifications to the filter. Once completed, I then need to move on to the other aspects of the strategy. This task seems incredibly time consuming if I cannot backtest my strategy. I am hoping to clear this issue up in the near future so I can get back on track.
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