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One of the techniques we use to complement Binary Waves is
to lock a signal in place once a specific value has been
calculated. For example, let's say your formula returns a
value from +10 to -10 and that your Buy Signal requires a
calculation result of => +6. A corresponding Sell Signal
would be =< -6. Once you got a +6, let's say, you would
keep that Buy in force until you get a Sell Signal. You
might designate a Buy Signal with a +1 and a Sell Signal
with -1.
We have several different Binary Waves that we use, along
with different weights applied to them. Our Signals are
based upon the calculated total of our Binary Waves giving
us a potential value from -10 to +10, along with a few
other technical values we calculate.
Anyway, If you think this technique would be of interest,
I'd be glad to send it along.
Regards
Guy
-----Original Message-----
From: Jim Greening [SMTP:jimginva@xxxxxxxxxxxxx]
Sent: Friday, February 27, 1998 1:38 PM
To: Metastock List
Subject: MS6.5 Binary Wave Profit System Test
All,
I've tweaked my existing MS 6.5 formulas, profit
system tests,
explorations, and expert and added a
binary wave test. I sent an MS 6.5 import file with the
revised
formulas to everyone on my MS 6.5 formula
list. If someone isn't on the list and wants to be added,
just yell.
I thought I'd take this opportunity to explain the
binary wave
test. The basic idea behind a MetaStock
binary wave is to use if statements on several MetaStock
indicators
and have them return plus one for a
bullish indication, minus one for a bearish indication, and
zero for a
neutral condition. Then you add them
all up for your binary wave indicator. I decided to format
all my
indicators so they would plot as a
histogram. For my indicators plotting as histograms,
positive is
bullish and negative is bearish. To cut
down on whipsaws, I decided that over +5 would be bullish,
under -13
would be bearish and anything in
between would be neutral. Therefore my binary wave
formulas are:
BW2 Demand Index
If(Tema(DI(),21) > 5,+1,If(Tema(DI(),21) <
-13,-1,0))
BW3 Linear Regression Slope
If(Tema(10000*LinRegSlope(C,34)/C,34) > 5,+1,
If(Tema(10000*LinRegSlope(C,34)/C,34) <
-13,-1,0))
BW4 CCI
If(Tema(CCI(21),21) > 5,+1, If(Tema(CCI(21),21) <
-13,-1,0))
BW5 ROC
If(Tema(ROC(C,21,%),21) >
5,+1,If(Tema(ROC(C,21,%),21)
< -13,-1,0))
BW6 Money Flow
If(Tema(MFI(21),21)-50 >
5,+1,If(Tema(MFI(21),21)-50
< -13,-1,0))
BW7 CMO
If(Tema(CMO(C,21),21) >
5,+1,If(Tema(CMO(C,21),21)
< -13,-1,0))
BW8 VAR ma
If(Mov(C,21,VAR) > Mov(C,55,VAR) AND
HHV(Mov(C,233,VAR),5) =
HHV(Mov(C,233,VAR),13),+1,If(Mov(C,21,VAR) <
Mov(C,55,VAR)
AND
LLV(Mov(C,233,VAR),5) =
LLV(Mov(C,233,VAR),13),-1,0))
The next formula just adds up the binary wave.
BW Add
Fml("BW2") + Fml("BW3") + Fml("BW4") + Fml("BW5")
+
Fml("BW6") + Fml("BW7") +
Fml("BW8")
Next, I decided to do something a little different. Since
the whole
purpose of this test is to catch a trending
stock, I decided to add an amplifier that would get larger
as the
trend got stronger. Since I like Fibonacci
numbers, I decided to use Rsquared as a measure of trend
strength and
base my amplifier on Fibonacci
numbers. The formula I finally came up with after a lot of
tinkering
follows.
BW Amplifier
If(RSquared(C,21) > 0.8,5,If(RSquared(C,21) >
0.6,3,If(RSquared(C,21) > 0.4,2,
If(RSquared(C,21)>0.2,1,0))))
The last step in constructing the binary wave was to decide
on the
smoothing and put it all together. Of course, I used tema
smoothing.
Tema Binary Wave Composite
Tema(Fml("BW Add")*Fml("BW Amplifier"),21)
The final step is to come up with a system test for
the Tema
Binary Wave Composite. Using the same
rationale that I used on the Tema DI S/C that I explained a
few weeks
ago, I decide on a +8 crossover for
my buy trigger and an optimized negative crossover for my
sell
trigger. I found that using optimized
numbers for closing the long and entering the short worked
best. I
try to optimize just enough to get the
test in the right ball park without over optimizing to the
extent that
I curve fit. Using cross over of positive
and negative values that envelope the zero line for signals
rather
then the zero cross over helps reduce
whipsaws. I also used the Alert function rather then just
the cross
over so I could confirm with other
signals within a 13 day period. I decided to use Qstick
and C being
higher then the previous high or lower
then the previous low for confirmations to reduce false
signals.
Therefore my buy signal became:
Enter Long
Alert(Cross(Fml("Binary Wave"),8),13) AND
Tema(Qstick(34),34) > 0 AND
C > Ref(H,-1)
My sell signal became:
Enter Short
Alert(Cross(-opt2,Fml("Binary Wave")),8) AND
Tema(Qstick(34),34) < 0 AND
C < Ref(L,-1)
Finally I wanted exit conditions that were less then full
signal
reversals, so I used the following
Exit Long
Fml("Binary Wave") < -opt1 AND
Tema(Qstick(34),34) < 0
Exit Short
Fml("Binary Wave") > 0 AND
Tema(Qstick(34),34) > 0
Finally I also used Fibonacci numbers for my optimization
Opt 1: Min 3, Max 13, Step 5
Opt 2: Min 8, Max 34, Step 13
That's it. I'd appreciate any comments, ideas, or
suggestions
for improvements.
Jim
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