Post Tagged with: "indicator"

Capture The Big Moves!

July 25, 2016 5:00 am19 comments

Wouldn’t it be great to have an indicator to help tell you when we are in a major bull or bear market? Imagine if you had a clear signal to exit the market on January 19, 2008 before the major market crash. Then the same indicator told you when to get back into the market on August 15, 2009. Such an indicator would have also gotten you out of the market during the dot-com crash on November 11, 2000. Well, this indicator I’m going to talk about does just that. Below you will also find the EasyLanguage code for this indicator. This major trend indicator was inspired by an article entitled “Combining RSI With RSI” by Peter Konner, and it appears in […]

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The Internal Bar Strength Indicator

March 28, 2016 5:00 am19 comments

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. […]

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Avoiding Stock Market Crashes with the Hi-Lo Index of the S&P500

November 23, 2015 5:00 am2 comments

This daily indicator is calculated as the ratio of the number of S&P500 stocks that have reached new 3-month-highs minus those that have reached new 3-month-lows, divided 500. Exiting and entering the stock market according the indicator’s signals would have avoided major drawdowns of the market during the backtest period from Jan-2000 to Aug-2015. Switching according to the signals between stock ETFs and the Intermediate Treasury Bond ETF IEF would have produced much higher returns and lower drawdowns than buy-and-hold of the stock ETFs. The Hi-Lo Index The index, expressed as a percentage, can vary from +100% to -100%. Over the backtest period it ranged from a minimum of -93% to a maximum of 62%, with the August 24, 2015 value being the third lowest at -77%, […]

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A Flexible Trailing Stop Function

August 3, 2015 5:00 am1 comment

The Anatomy of a Stop A stop can be defined by specifying four basic parameters, illustrated in Figure 1 below: Price Reference: The price from which the stop is offset (white line) to create a stop value. Stop Offset: The distance from the Price Reference to the stop value. Price Trigger: The value of price that will trigger the stop. Usually this is the low or the high of a price bar. However, more sophisticated stops can be created by setting the trigger to a custom function of price, such as Average(Low, 3) to make the stop less vulnerable to isolated tall tails. Reset Padding: The distance the stop should be reset away from the Price Trigger when the stop […]

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How to Trade the MACD: A High-level Analysis of the MACD Line Feature

April 27, 2015 5:00 am6 comments

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. […]

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Distance Weighted Moving Averages (DWMA and IDWMA)

January 12, 2015 5:00 am3 comments

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. […]

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The 40-Week Cycle Revisited

December 1, 2014 5:00 am3 comments

As I mentioned last time around, when it comes to analyzing the financial markets, I am a proud graduate of “The School of Whatever Works.” In my youth I “wrote down” a lot of interesting analysis ideas (that’s how we did it back then, sadly). Whenever I would hear or read of a new market analysis or market timing idea, rather than passing judgment one way or the other based solely on my own “youthful wisdom” (har, good one), I would agnostically write it down and “track it for awhile.” OK, “quantitative” is not a word that most youths get around to using until, well, whatever it is that comes after youth (which I believe most people refer to as […]

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Modified Chartmill Value Indicator (MCVI)

October 20, 2014 5:00 am7 comments

I read about this indicator in an article titled “The Chartmill Value Indicator,” which appeared in the January 2013 issue of Technical Analysis of Stocks and Commodities. The article was written by Dirk Vandycke. In the article, Vandycke introduced an interesting oscillator called the Chartmill Value Indicator (CVI). The following article explains the CVI formulas, proposes a modified version of the CVI (MCVI), and demonstrates the potential of the MCVI with a sample pullback strategy. AMIBroker code for the MCVI is included at the end of the article. The Modified Chartmill Value Indicator (MCVI) The CVI represents a standardized deviation from a moving average, which can be applied to any price series over any period. The concept is simple. As […]

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FRAMA – Is It Effective?

September 16, 2013 5:00 am5 comments

The Fractal Adaptive Moving Average aka FRAMA is a particularly clever indicator.  It uses the Fractal Dimension of stock prices to dynamically adjust its smoothing period.  In this post we will reveal how the FRAMA performs and if it is worthy of being included in your trading arsenal. To fully understand how the FRAMA works please read this post before continuing.  You can also download a FREE spreadsheet containing a working FRAMA that will automatically adjust to the settings you specify.  Find it at the following link near the bottom of the page under Downloads – Technical Indicators: Fractal Adaptive Moving Average (FRAMA).  Please leave a comment and share this post if you find it useful. The ‘Modified FRAMA’ that we tested consists of more […]

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Moving Averages – Simple vs. Exponential

July 29, 2013 5:00 am4 comments

In this round of testing we put the Simple (SMA), Exponential (EMA) and Double Exponential (D-EMA) Moving Averages through their paces to identify which is the best and what characteristics can be expected as the length of each average is adjusted. We tested Long and Short trades using Daily and Weekly data, taking End Of Day (EOD) and End Of Week (EOW) signals with Moving Average lengths varying from from 5 – 300 days or 60 weeks.~ These tests were carried out over a total of 300 years of data across 16 different global indexes (details here). Simple vs. Exponential – Test Results: Annualized Return Annualized Return During Exposure Trade Duration Time In The Market Biggest Loss Probability Of Profit […]

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