John Ehlers is a name you’ll run across when you start your journey into testing various indicators and filters to be used in your trading models. I remember reading about the Laguerre Filter and Laguerre RSI many years ago when they first appeared on the scene. At the time I was not nearly into quantitative trading as I am today. So let’s take a closer look at the Laguerre RSI and answer a simple question: Can the Laguerre RSI perform better than our standard 2-period RSI? Laguerre RSI (LRSI) was authored by John Ehlers. You can read about the Laguerre filter in his article, “Time Warp – Without Space Travel“. At the heart of the LRSI indicator is the Laguerre […]
I’ve written a lot about the 2-period RSI indicator popularized by Larry Connors and Cesar Alvarez. This indicator...
Wouldn’t it be great to have an indicator to help tell you when we are in a major bull or bear market? Imagine...
Investors utilize a variety of performance and risk metrics to evaluate strategies. These numbers provide a summary...
Some people tell me that I have “too much time on my hands” because I spend so much time “crunching numbers”. I tell them, “That’s ridiculous, I don’t have any time on my hands because I am so busy crunching numbers”. (That usually shuts them up. At least for a little while). In any event it is true that I am something of an “indicator junkie”. And it is also true that sometimes I multiply two numbers together (or divide two numbers) just “because I can”. And every once in awhile something potentially valuable seems to surface (see Applying VIX(like) Indicators to Stocks). But in the most recent case I am hoping that someone can help me here. Not so long ago, […]Read more ›
The internal bar strength or (IBS) is an oscillating indicator which measures the relative position of the close price with respect to the low to high range for the same period. The calculation for Internal Bar Strength is as follows… IBS = (Close – Low) / (High – Low) * 100; For example, on 13/01/2016 the QQQ etf had a high price of $106.23, a low price of $101.74 and a close price of $101.90. The value of IBS would be calculated as … (101.90 – 101.74) / (106.23 – 101.74) * 100 = 3.56 Low IBS readings show that a market has closed near the lows of the day, high IBS readings show that a market has closed near the highs of the day. […]Read more ›
The vast majority of technical indicators perform a computation on the price or volume of an individual security. While these indicators can provide valuable insights, most traders ignore the most effective type of technical indicators. Market Breadth Indicators Market breadth indicators do not use information based on a single security, they use information based on every security – and all securities are treated equally. This is very different from calculating an indicator value on an index or exchange-traded fund (ETF), most of which are capitalization-weighted. In a capitalization-weighted index, a single large cap stock (like AAPL) can have a disproportionate effect on the performance of an index, masking the true health of the overall market. As a result, market breadth […]Read more ›
Moving Average Convergence Divergence (MACD) is one of the most popular technical indicators used by traders. It is a flexible indicator that can be used for determining the strength and direction of a trend. It has three distinct features and in this first post we are going to do a high-level analysis of one of those features, the MACD Line. We will compare three of the most common MACD Line settings on the EUR/USD using daily bars over the past few years to determine whether or not there is a historical pattern that can be exploited. What is the MACD Line? The MACD Line was the first feature developed in the MACD indicator. It was developed around 1977 by Gerald Appel. […]Read more ›
In the article,Win Rate The Most Important Metric, Michael Harris discusses the importance of Win Rate when it comes to building a profitable trading system. I spent a few minutes creating an EasyLanguage function that can be used during your development process in calculating the Win Ratio for you. The function can be applied to any strategy. It’s capable of returning the Win Rate and displaying it within the print window. Below is a short video explaining the function. The most important metric…free download. Click To Tweet Downloads Win Ratio Function Code (TradeStation ELD or Text File)Read more ›
The distance weighted moving average is another nonlinear filter that provides the basis for further research and exploration. In its traditional form, a distance weighted moving average (DWMA) is designed to be a robust version of a moving average to reduce the impact of outliers. Here is the calculation from the Encyclopedia of Math: Notice in the example above that “12” is clearly an outlier relative to the other data points and is therefore assigned less weight in the final average. The advantage of this approach to simple winsorization (omitting outliers that are identified from the calculation) is that all of the data is used and no arbitrary threshold needs to be specified. This is especially valuable for multi-dimensional data. […]Read more ›