Fixed vs Adaptive Parameters in Algorithmic Trading

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I've been developing trading EAs for about a year now, and one thing I keep running into is the same issue over and over: lagging indicators.

Take a simple trend-following strategy using an EMA Golden Cross and Death Cross. It can perform really well in certain market conditions, but over time it starts to lose its edge because by the time the crossover happens, a big part of the move is already over.


That got me thinking.


Has anyone here experimented with making indicator parameters adaptive instead of keeping them fixed forever? For example, instead of always using EMA 50/200, the EA could continuously adjust those values based on its own internal calculations and recent market behavior. The idea would be for the EA to adapt as the market changes rather than relying on the same settings year after year.

I know this can easily turn into overfitting if it's done the wrong way. The difficult part is finding a way to adapt without simply optimizing for what just happened. I'm curious how more experienced developers here deal with this.


Do you just accept that every strategy will have market conditions where it performs poorly?

Do you use adaptive indicators or self-adjusting logic? If you do, how are you approaching it?

Or have you moved away from traditional crossover systems altogether?


I'd really like to hear how others have tackled this problem or if you've found a completely different way of thinking about it.


The longer I spend building algo trading bots, the more I realize how endless the possibilities are. Every time I think I've seen everything, I come across another idea that I never would have considered.

I once talked to a trader who said he was using satellite images of oil ports and tanker traffic around the world to help predict supply changes before trading oil. My first reaction was that it sounded completely over the top, but the more I thought about it, the more I wondered if there was actually an edge there.

Do you think something like that is realistic for independent traders, or is that the kind of approach that's only practical for institutions with deep pockets?

I'd also love to hear about any unconventional data sources or ideas you've seen people use successfully. The more I learn about algorithmic trading, the more it seems like there really are no limits to where an edge can come from.

 
Gio Rendel Masagca Rivadillo:

Has anyone here experimented with making indicator parameters adaptive instead of keeping them fixed forever? 

There are plenty of adaptive indicators in the CodeBase. Do a search, and test them out. If you find a good one, use iCustom() to code it into an EA.
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