|
PureBytes Links
Trading Reference Links
|
Al,
thank you for your effort.
Unfortunately this system is a bit worse than B&H.
i have checked the details, if there is any interest.
Dimitris Tsokakis
--- In amibroker@xxxx, "Al Venosa" <avcinci@xxxx> wrote:
> AB users:
>
> I copied this article from Chuck LeBeau's website this morning
> (www.traderclub.com). It's an interesting combination of 2
indicators
> into a trend-following system for EOD data users. Seems like the
> system should be easy to code in AB. I haven't done so yet, since
I'm
> writing this from work.
>
> Al Venosa
>
> ------------------------------------------------------------
> The Traderclub Forum: Traders Club Bulletins: Bulletin 52
> Combining RSI and ADX
> ------------------------------------------------------------
>
> By webmaster (Admin) on Monday, October 7, 2002 - 07:12 pm:
>
> BULLETIN #52
>
> Combining RSI and ADX
>
>
> By Chuck LeBeau
>
> Now that I am spending seven hours a day doing trading for
> the new hedge fund I haven't had much time for research or
> writing new Bulletins. However a comment in one of the
> trading newsgroups that I monitor got me thinking about the
> potential benefits of combining our knowledge of RSI and ADX
> into a simple system. Both the ADX and RSI are valuable
> trading tools and a combination of the two would seem to
> offer some interesting possibilities. I like to use the RSI
> primarily as an indicator for buying on dips in an uptrend.
> The ADX is my primary indicator of trend strength.
>
> Here are a few ideas on how the two indicators might
> compliment each other in a system that "knows" when to enter
> on strength and when to buys on dips. (I'm only going to use
> the long side for examples but the logic should apply to
> short trades as well.)
>
> When the ADX is rising it usually indicates that a strong
> trend is underway. In many cases waiting for any sizeable
> dip would be costly because the market could run away and
> the dip entry would be too late to maximize our profits. In
> this case we must enter on strength. To make this idea into
> a simple trading rule we might state that if the ADX is
> rising (and we have some indication it is rising because an
> uptrend is underway) we will buy whenever the RSI is below
> some very high threshold like 85. This rule would give us a
> very prompt entry in most cases and the result would be
> almost identical to simply trading whenever the ADX is
> rising which seems to be a good idea. The RSI has little,
> if any, benefit in this situation except it might
> occasionally keep us from buying into an extremely
> overbought market where the RSI was above 85. In this case a
> slight delay on the entry might be prudent.
>
> The RSI, however, can play a much more important role when
> the ADX is flat or declining. In this case the rule would
> be that when the ADX is not rising we should postpone our
> entry until the RSI is below some more typical threshold
> like 45 or 50. Since the ADX is not giving us a signal that
> the trend is unusually strong we would need some additional
> indicator to show that the market has some minimal amount of
> upward direction. Otherwise we would not be buying a dip
> within the framework of an uptrend. Something simple like
> an upward sloping 20-bar moving average might work in this
> application.
>
> Now that we have combined the ADX and RSI for our entries we
> might also want to combine them for our exits. When a
> market is rising but the trend is not particularly strong
> any spike in the RSI represents a good opportunity to take a
> profit. For example when trading in stocks the 9-bar RSI
> rising above 75 or 80 often signals that a correction is
> imminent. If the market trend is not unusually strong we
> would probably be happy with taking our profit on strength
> rather than waiting to get stopped out on weakness. However
> if the ADX is rising we might want to risk a correction in
> hopes of riding the trend even further. In this case when
> the ADX was rising we would ignore the RSI signal to take
> our profit. However, once our patience has allowed us to
> accumulate a very substantial open profit we might be best
> served by acting on the next RSI signal and nailing down the
> big winner. Also, when the ADX is rising it would not make
> much sense to be buying at a high RSI level and also selling
> at a high RSI level. We would be in and out of our trades
> almost immediately. Therefore we need to ignore the RSI
> extremes until our profit has had a chance to accumulate.
>
> In summary, the important concept to remember is that our
> knowledge of the ADX can make the RSI a much more useful
> trading tool. When the ADX is rising the RSI tends to get
> overbought and it can often remain overbought for a
> surprising length of time. On the other hand when the ADX
> is flat or declining any spike to the upside in the RSI is
> an opportunity to nail down a profit. Conversely, any spike
> to the downside can be a potentially profitable entry point.
>
> Here is the logic of a simple little system based on this
> discussion. (Just the rules in text form, you will have to
> do your own coding.) The parameters selected have not been
> tested or optimized. For example the 20-day moving average
> is just a number I picked out of the air. This is enough
> information to get you started and you can vary the rules to
> make the system trade over whatever time frame you prefer.
>
> Long Entries:
>
> 1. The 20-bar moving average must be rising.
> 2. If the ADX is rising (ADX today is 0.20 or more higher
> than yesterday) then buy if the 14 bar RSI is less than 85.
> 3. If the ADX is not rising (ADX today is not 0.20 higher
> than yesterday) then buy if the 14 bar RSI is less than 50.
> Here is where you can influence the frequency of trading.
> For more trades use a higher threshold like 60. For fewer
> trades use a lower threshold like 40.
>
> Long Exits
>
> 1. If the ADX is not rising (ADX today is not 0.20 higher
> than yesterday) then sell (long exit) if the 9-bar RSI is
> greater than 75.
> 2. If the ADX is rising (ADX today is 0.20 or more higher
> than yesterday) and the open profit is greater than (pick
> some amount - maybe 4 ATRs or some unit of price) then sell
> if the 9-bar RSI is greater than 75.
> 3. You need some additional exit rule for the losing trades.
>
> Use your favorite loss-limiting exit or you might want to
> exit when the price goes below the 20-day moving average or
> when the 20-day moving average turns down. (See entry rule
> 1.)
>
> Good luck and good trading.
>
> Chuck LeBeau
|