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<FONT face=Arial
size=2>Lionel
<FONT face=Tahoma
size=2>-----Original Message-----From: phsst [mailto:phsst@xxxxxxxxx]
Sent: Wednesday, March 26, 2003 10:15 PMTo:
amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re: TRENDING vs.
RANGING marketsGosub states:<<However....
What I'm really looking for is what people foundto be the best indicator to
help identify the current situation (notthe future). I was basicaly throwing
out a question to everyone tosee if anyone has had better success than me
when developing atransitional system that identifies when it is necessary to
change toa different indicator.>>That is a fair question and
I'll be happy to share my own experiencewith backtesting (and trading) trend
detection systems.In the book Street Smarts co-authored by Linda
Raschke, she outlined atrading methodology named the 'Holy Grail' which uses
the ADX, PDI,MDI indicators to determine trend direction.With the
help of a friend who has more 'instinctive' abilities thanme, I developed a
backtest system based upon a slight derivitive ofLinda's 'Holy Grail' and
hit paydirt. The 'Holy Grail' system is a classic pullback system that
Lindaprimarily trades futures with. My friend and I adapted it to
stocktrading.In my own software, I calculated an Annual Percentate
Rate of return of189.59% for the past 10 or 11 years on the whole market. I
recentlyadapted my 'Holy Grail' system to Amibroker and achieved
silimarresults but with improvements using the Optimize function.
ABcalculates the APR differently and reports a RAR of 142.21%, but
witheven greater monatery return amounts. While I don't know for sure,
Ithink the difference in calculated percentage returns is that in myown
system calculates returns based upon calendar days of exposure tothe market,
while AB might use Bars of exposure to the market. Butthat is a subject for
another discussion.A few weeks ago, I believe that Jayson stated that
pullback systemsstopped working after the 1999 blowoff, buy my system has
shown aprofit every year for the past 11 years.As an aside... I'd
encourage others to post backtest results on thewhole market for the past 10
or 11 years of their favorite systemsjust to see how good other trading
systems can be using a RAR or APRmeasurement.But anyway, back to
this thread: In developing other trading systems, I can generally
improve resultsby incorporating the ADX, PDI, MDI indicators to implement
trenddetection in my system development efforts.Also, I use a Quotes
Plus database which has a historical QRSindicator which emulates Investors
Business Daily's proprietaryRelative Strength indicator. And my experience
has been that by alsofiltering with the QRS indicator, my backtesting
results are improvedeven more. The only problem is that Quotes Plus
apparentlyincorporated the QRS measurement in 1995, so when using
thatindicator, you cut into the amount of historical data that you can
useto backtest.Hope this is what you were asking for. And I hope
that others willshare their 'favorite' trend detection indicators with the
metricsthey use to measure system trade improvements. Whenever I need a
trendindicator, the ADX, PDI, MDI are the first indicators I grab for.
Howabout the rest of you?Phsst--- In
amibroker@xxxxxxxxxxxxxxx, "gosub283" <gosub283@xxxx> wrote:> Hi
Yuki,> > Thanks for your comments.> I agree with you
completely. However....> What I'm really looking for is what people
found> to be the best indicator to help identify the> current
situation (not the future).> I was basicaly throwing out a question to
everyone to> see if anyone has had better success than me when>
developing a transitional system that identifies> when it is necessary to
change to a different indicator.> I have had success with such a system.
The problems> arise during the transition phase from Trading to
Trending.> (Some losses due to ambiguity/confusion.)> Once the
transition is completed and the system automatically> changes to the
appropriat indicator, it works fine.> I was trying to see if anyone else
had played with this> and perhaps found a better way.> I am
familiar with many indicators which can help with this> but I'm always
open to others.> Jayson was very helpfull in pointing out the R-Squared
and> Twiggs-Money Flow.> > Thanks again,>
gosub283> > > --- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga
<yukitaga@xxxx> wrote:> > Hi gosub283,> > >
> Thursday, March 27, 2003, 2:08:16 AM, you wrote:> > > >
g> When a human looks at a chart, he/she can immediately determine >
if> > g> a market is in a TRENDING mode or a RANGING mode. It is a
most> > g> amazing feat of human visual data analysis that takes
place in a> > g> matter of seconds. Trying to get computers to
"visually" analize> > g> anything takes major computing power.
Unfotunately computers and> > g> trading system have a much more
difficult time of determining> > g> these market modes than us
humans.> > > > I am not so sure humans do a much better job
of this analysis than > do> > computers. When we look at
charts, we are looking at 100 percent> > history. It is indeed
rather easy to "segment" this history into> > trending and ranging
periods using analytical abilities. Yes, it> > does happen in
seconds, and seems almost effortless.> > > > However, the
most important time period for any trader is that > period> >
of time which is NOT VISIBLE on the chart -- namely, the future.
We> > can "see" the ranging and trending periods, but only in
retrospect,> > where our minds make nice, neat visual categories for
us based on> > what we *see*. But at the "real time" turning
points, when the> > actual transition is in the future, out of sight,
I doubt if either> > human or computer can reliably identify these
transitions in > advance.> > (Reliably to me would be with some
statistical edge that clearly> > beats random guessing.)> >
> > In hindsight, it is all so clear of course -- so clear that it
is> > tempting to believe that one can find some mathematical formula
that> > will reveal all. But this is a sect in the cult of "Holy
Grail-ism"> > in my opinion. To test my theory that human beings are
not any > better> > at identifying the transitions in "real
time" than computers, scroll> > a chart very slowly (bar by bar) from
left to right, with the future> > always off the screen, just as in
real life. Make sure the chart is> > a completely unknown issue
or index, and preferably one with the> > dates entirely removed or
obscured (to do this test correctly > someone> > else will
probably need to set up a blind test for you, I don't > think>
> you can truly set up a valid blind test yourself). Now see > how
"good"> > your human brain is at identifying the transitions in "real
time".> > And good luck! ^_-> > > >
YukiSend
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