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Steve,
Dratio is not like Stochastics or RSI.
>From the beginning it deals the intraday spread H-L.
In order to avoid absolute prices [H-L at 1000 and H-L at 1.5 would
be quite far] it devides by H+L and permits comparison among various
stocks.
In your gif, for the bullish AND the bearish trend, H-L is
significantly increased as you can see at the first glance, before
any calculation.
When a stock begins the trendy phase the synthesis of the traders
change. After the beginning of the trend [due either to a fundemental
change or a rumor for upcoming great contracts...] many hunters will
visit the stock for short term trading. The usual result is the
increasing of volatility and intraday spread [it is natural, the
usual sellers will keep on selling until they kill the uptrend and
will continue the sell-off up to the level they began throwing papers
on the floor, sometimes you will notice high volumes without obvious
reason : I would understand everything if some trader buys 10K or 10M
shares at $11 and sells 10M at $13. It is hard to understand buying
pressure 10M at $11 and a week later selling pressure 100M at $13 !!
In last analysis it may be simple: some share holders sell at any
level according to the demand: they just open the drawer and cover
ANY market request.
Dratio attempts to "see" this movement. Sometimes it is great, some
other it is just a (H-L)/(H+L) ratio.
It was VERY useful in the volatile period 2000-2003, now, the last 6
semi-bullish months it is not a protagonist, many Dratio systems gave
the last signal last Sept or so, waiting for more ambiguous and
volatile times again...
DT
--- In amibroker@xxxxxxxxxxxxxxx, "Steve Almond" <steve2@xxxx> wrote:
> Dimitris,
>
> You are correct, the curves for Dratio40 DO cross. I'm unsure just
what is being measured here, though. Look at the attached chart which
shows BEBE going through 5 weeks of bullish behaviour followed by 5
weeks bearish. Dratio40 just keeps climbing the whole time!
>
> Steve
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