Friday, December 3, 2010

Predictors and indicators

Q: Some algorithms in user guide are referred as predictors, others – as indictors. What is the difference between these two kinds of algorithms in trading usage?

A: We offer classical indicator style algorithms intended as the analysis tool for historical data and as an auxiliary supplement in building custom strategies by the user. Indicators are very similar in their usage to the standard technical indicators common in most trading platforms.

Predictors, even though very similar in display to indicators, are much more elaborate algorithms in mathematical sense. They are designed not to simply monitor the price dynamics, but to predict future dynamics depending on existing historical prices. Predicted future price serves as the advice to trader to make immediate decision on the current positions to maximize returns. Trader may wish to perform certain actions depending on the predicted price change. For instance, trader may wish to close position, if he will see that the price is likely to move down on the next bar, according to predictor. In this way, predictors serve as precise trading advisors.