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Dimitris:
You have probably a good idea. There was a body of work begun by
Cardwell, which observed RSI 14 tending to a 40-80 bull-band,
or a 20-60 bear-band:
He introduced (I believe) the predictive concept of positive and
negative reversals (being inverted divergences of RSI v. Price
pivots); It had some beneficial predictive results concerning
subsequent peak and trough price.
However, as you indicate, these ranges are not transferable from one
stock to another, necessarily, or from an index to member stocks, etc.
Rather than manually adjust the RSI value, in attempt to fit price
action into one of the above ranges, you seem to be striving for a
more specific number, which should have good results.
M.R.
--- In amibroker@xxxx, "Dimitris Tsokakis" <TSOKAKIS@xxxx> wrote:
> Oversold and overbought levels are usually selected by experience
and may
> be not satisfactory for a certain Market.
> We can change levels in order to give a more reliable description
of the Market.
>
> 1. When we select 30, 70 , i.e. equal distance from 0, 100, we have
not any reason
> to do it. Perhaps 24, 70 for example would be more realistic.
>
> 2. I have the following idea:
> I will examine the oversold time for each stock, I will take its
average and so I will
> define the "mean oversold time (MOT)" for the Market.
> This will be done for an oversold level which gives MOT >5% of
total days, else oversold is meaningless.
>
> 3. Then I will search for a certain overbought level which gives
the same "mean
> overbought time". I consider this more fair for the Market, whereas
30, 70 or 20, 80
> sounds abritary.
> In other words, I ask levels which share the time equally for
oversold and overbought
> phases.
>
> Any opinion on this ?
> (The thought behind the curtain is that buyers and sellers wait
nearly the same
> time interval, until they change the trend.)
> (formulas are almost prepared, I want to discuss the basic thought).
>
> Best regards
> Dimitris Tsokakis
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