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--- In amibroker@xxxxxxxxxxxxxxx, "Dave Merrill" <dmerrill@xxxx>
wrote:
> does anyone know how to automatically calculate channel (envelope)
widths
> like dr. elder intends? far as I can tell, this is idiosyncratic to
him;
> everywhere else I've found references to channels, they just mean
the
> general idea of constant ratio above and below an EMA.
>
> I don't know how to turn the reference to standard deviation into
code. he
> specifically contrasts channels to Bollinger Bands, which are
plotted some
> number of standard deviations away from the EMA.
>
> anyone understand this better than me?
He's talking about using your eye to fit the channels. There is no
way to calculate a MA + parallel lines to cover 2 standard deviations
(95.7% of variance) due to changing volatility. You could get one to
fit for a certain range, but not one to fit all the data. That's why
Bollinger Bands are rarely parallel to the MA. When he says software
makes it easy to make adjustments, he means in adjusting the parallel
lines with a fitting coefficient.
He's talking about finding a good MA -- you may want one that the
price keeps bouncing off in an uptrend, or one that goes through the
center of the bars, or one that the price stays under in a
downtrend... Then drawing parallel lines above and below to define
the range.
Params in AB make it easy to set this up.
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