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Yes, this is true Harvey. Unfortunately, it also guarantees that the VIDYA
will NEVER be more sensitive than the equivalent period EMA. Runs
contradictory to his reasoning and defeats the purpose of using it in my
opinion.
Funny how he introduces his VIDYA concept by using K indexed standard
deviation, which clearly can become greater than 1. Perhaps it's his use of
a "scaling factor" that has no relationship to Alpha = (2/(N + 1)) that
makes VIDYA indexed to a bounded variable like CMO or R2 acceptable?
BTW, it's been my observation that even for very high values of K, unless
very small values for N are used, (1 - alpha * K) is always positive. Mind
you, my habitual laziness prevents me from running a rigorous empirical test
:-)
cheers,
Rick
Tokyo, Japan
-----Original Message-----
From: Harvey Pearce <hpearce@xxxxxxx>
To: Rick Mortellra <rmjapan@xxxxxxxxxxxxx>
Cc: metastock-list@xxxxxxxxxxxxx <metastock-list@xxxxxxxxxxxxx>
Date: Friday, February 13, 1998 10:39 AM
Subject: Re: Multi-Period Indicators
>On page 52 of Chande's "The New Technical Trader" he writes "In choosing
>values for alpha and k, we must ensure that the term (1 - alpha * K)
>never becomes negative." Bounding K between 0 and 1 would ensure this
>since alpha could approach 1. Alpha = (2/(N + 1)).
>
>Harvey Pearce, Victoria, B.C., Canada
>
>Rick Mortellra wrote:
>>
>snip .....
>>
>> That got me thinking about why the VMA indexed to the CMO didn't deliver
on
>> sensitivity. The answer then hit me over the head! The absCMO is bounded
>> between 0-1. Using this as the indexing factor would naturally lead to a
>> less sensitive indicator. Why Chande suggests on p68 of his book that
using
>> any index that varies between 0-1 is appropriate has mystified me,
>> especially since the other indexing examples he provides clearly aren't
>> bounded.
>>
>> It seems to me then that using VMA indexed to standard deviation or other
>> unbounded indicators is more appropriate. Any ideas as to why absCMO is
seen
>> as a better choice? Is the math just evading me?
>>
>snip ....
>
>
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