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Many variables of Technical Analysis are
fluctuating in a wide range.
It is more convenient to put them all in the same
scale, 0...1 or 0...100.
The result of this technique will be a
normalization of a variable.
Among various ways of normalization we will present
here the following,
applied over close price.
a. Short Term Stochastic
/*AFL code for Short Term Normalized
Close*/
X=CLOSE;
<FONT face=Arial
size=2>NormalizedX=100*(X-LLV(X,14))/(HHV(X,14)-LLV(X,14));
graph0=NormalizedX;
b. Long Term Stochastic
/*AFL code for Long Term Normalized
Close*/
X=CLOSE;
<FONT face=Arial
size=2>NormalizedX=100*(X-LOWEST(X))/(HIGHEST(X)-LOWEST(X));
<FONT face=Arial
size=2>graph0=NormalizedX;
The result is a graph oscillating in the range
0...100.
Replacing CLOSE in above codes with another
variable, you will normalize it.
(X=VOLUME, X=MACD(), X=CCI(14), etc.)
Note that some functions of T/A are already
normalized by definition
(RSI(PERIODS), STOCHK(PERIODS), STOCHD(PERIODS)
etc)
and do not need further normalization.
The above transformation leads to interesting
results.
Dimitris Tsokakis
P. S. If your data extend more than two years, you
may replace
LOWEST(X) with LLV(X,500) respectively HIGHEST(X)
with HHV(X,500).
Support and Resistance levels, formated 3 years
ago, perhaps are not valid anymore.
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