Investigating the Efficiency of Market Indicators in Trading Systems

In this paper, we evaluate the usability of different market indicators. To do so, we propose and analyze three methods that can be used to estimate the efficiency of market indicators for specific trading instruments. In these methods, different measures of efficiency are applied, referring to the correctness of signals generated by the given indicator, their profitability, and the maximal drawdown concept. Formulations of these measures are presented and implemented in an experimental trading system. The system has been used in tests based on real-world data acquired from the forex market.