---

How to make your own technical indicators?

When any technical indicator is used by large number of people in the same way to decide on a trade, it starts to lose its edge. Eventually it becomes a game of speed, wherein retail traders aren't at any advantage.

This is why large trading companies don't use the technical indicators which you read up online. They have researchers who make their own indicators which are back-tested for their performance and then deployed for real trade. These indicator models are kept secret because it's the bread and butter of these companies and researchers who make these indicator models are very highly paid by hedge funds and investment banks.

So how are these models made ?

It requires quite a bit of math, stats and data science along with understanding of finance to make these models but you can make some with intuitive understanding as well. Here is an example of such a model

Rank(-1*correlation (price,volume,5) )

This is what it means : Take the correlation between price and volume of a basket of stocks for the past 5 days, make it negative and then rank them.

Go long on the top 20 percentile ranks and short the bottom 20 percentile ranks.

Try this out and let me know how it works for you. Worked quite well for me. There are many more such models which you can reach out to me for. Cheers!