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We do not have yet a SAR(varIAF,varAF) function.
I will try to show the use of this function.
The yellow line is a smoothed CMO indicator with 3 SAR
companions :
FAST [red], MEDIUM [green] and SLOW [white].
The respective SAR parameters are
IAF3=0.03, AF3=0.6 [FAST],
IAF2=0.02, AF2=0.4 [MEDIUM] and
IAF1=0.01, AF1=0.2 [SLOW]
The crosses of the initial yellow indicator with its SARs will
give entry and exit points.
The fast SAR would give quick entry, but it is suspect for
useless, expensive or catastrophic whipsaws [point W]
The slow SAR will loose the beginning of the trend and may
cause dangerous delayed exits.
The solution would come from a variable SAR with the following
properties : FAST in the beginning and the end of the trend
and SLOW in the mean time, to avoid the minor whipsaws [we
have lost higher profits because of a nervous, premature exit...]
There are numerous trend followers who can be calibrated to
give automatic variable SAR.
To have a first idea follow the black line [an attempt for
variable SAR]: It moves from FAST to MEDIUM or SLOW line with
a good trend "feeling". The results are much better than the
use of one SAR all the time .
This black line would be uniform if we had a SAR(varIAF,vafAF)
function.
The criteria of variability, carefully selected, would make
SAR more "intelligent".
With the present SAR functionality, select red/green/white SAR
and good luck !!
When the market changes, it is better to follow the market,
instead of using an always-fast or always-slow SAR.
Dimitris Tsokakis
PS: The attached gif has ^NDX last autumn smoothed CMO and an
IAF contolled by Stochastic volatility.
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Attachment:
VariableIAF.gif
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