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Close is not always in the middle of H, L distance.
Some periods C is >(H+L)/2 and some other C is <
(H+L)/2.
The difference
<FONT
size=2>R0=RSIA<FONT
size=2>(C,T1)-RSIA<FONT
size=2>((H+L),T1);Plot<FONT
size=2>(R0,"",<FONT
size=2>1,1<FONT
size=2>);
for a fast period T1=5 is a measure of this
property.
The line is too noisy and needs cascade smoothing
[without significant delays] to reveal
the interesting signal. DEMA is the proper
smoothing function, since it reduces the delay.
A five-step smoothing would be like
this
R1=DEMA(R0,T0);<FONT
face=Arial>
R2=DEMA(R1,T0);<FONT
face=Arial>
R3=DEMA(R2,T0);<FONT
face=Arial>
R4=DEMA(R3,T0);<FONT
face=Arial>
R5=DEMA(R4,T0);
For a period T0 around 50, the noise is totally
removed and the resulting curve is quite
expressive. It crosses zero and becomes negative
during the important uptrends and it
is positive during bearish
intervals.
Buy=Cross(<FONT
size=2>0,R);
is a simplified buy condition.
Significant uptrends usually last more than 20
bars. After the first peak and the first
retracement, the market gives some more potential,
visualised from double peaks,
divergences etc. These observations advise to avoid
long positions for more than 40 bars
[the bears will not disguise their feelings for
long...]
X=Optimize(<FONT
size=2>"X",28<FONT
size=2>,20,<FONT
size=2>40,1<FONT
size=2>);Buy=<FONT
size=2>ExRemSpan(Buy,X);Sell=<FONT
size=2>Ref(Buy,-X);
expresses the requirement to sell 20 to 40 bars
later.
The extended smoothing can express the influence of
a leader market, like ^NDX, to
dependent markets like ^N225 or
^GDAXI.
^N225 is one of the most difficult markets,
directionality is very poor and many trading systems
fail.
Let us use ^NDX data, follow the above description
and apply it to ^N225.
The project sounds a bit absurd but it is
not.
N="^NDX";<FONT
size=2>
O=Foreign(N,<FONT
size=2>"O");H=Foreign<FONT
size=2>(N,"H");L=<FONT
size=2>Foreign(N,"L"<FONT
size=2>);C=Foreign(N,<FONT
size=2>"C");<FONT
face=Arial>
t0=50;<FONT
size=2>
T1=5;<FONT
size=2>
R0=RSIA<FONT
size=2>(C,T1)-RSIA<FONT
size=2>((H+L),T1);Plot<FONT
size=2>(R0,"",<FONT
size=2>1,1<FONT
size=2>);
R0=DEMA<FONT
face=Arial>(R0,T0);
R1=DEMA<FONT
face=Arial>(R0,T0);
R2=DEMA<FONT
face=Arial>(R1,T0);
R3=DEMA<FONT
face=Arial>(R2,T0);
R4=DEMA<FONT
face=Arial>(R3,T0);
R5=DEMA<FONT
face=Arial>(R4,T0);
R=R5;);Plot<FONT
face=Arial>(R,""<FONT
size=2>,2,<FONT
face=Arial>8);
X=<FONT
size=2>Optimize(<FONT
size=2>"X",28<FONT
size=2>,20,<FONT
size=2>40,1<FONT
size=2>);<FONT
face=Arial>
Buy=Cross(<FONT
size=2>0,R);
Buy=<FONT
size=2>ExRemSpan<FONT
size=2>(Buy,X);
Sell=<FONT
size=2>Ref<FONT
face=Arial>(Buy,-X);
Short=Sell;
Cover=Buy;
The Long part give since Jan2000
a return on account +42% [the respective ^N225 B&H return was
-50%]
with an exposure 14% and max
system drawdown -14.6%
The full Long/Short system gives
a net profit +193% [max sys drawdown -21%] , wich is quite satisfactory
for
tough markets like ^N225. The
distribution of profits for x=20 to 40 bars interval is not bad at all.
//^N225 [50,5,5,28]=+45%LONG, +193% LONG/SHORT
//[50,5,5,30]=+193%
<FONT color=#000000 face=Verdana
size=2>
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