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Steve,
Thank you for sending me your formula: ufortunately I have found little time to test it
(until now).
There is however, something that amazes me: the formula gives a plot similar to that of
the Bollinger %b, wich is nothing more nothing less a stochastic of the price compared
to the width of the band.
Here is my formula:
((c+std(c,20,2)-mov(c,20,s))/(std(c,20,4)))*100
As you're going to see it usually oscillates between 0 and 100, just like stochastic
does. But, a wider move is allowed whereas readings above 100 or below 0 reflect closes
above the higher band or below the lower. But you can see for yourself plotting the
formula...
Furthermore. As I stated in my earlier posting the formula of the BWI allows you to
chart exactly the width of the band, so to spot low (or high) volatility. As far as I
understand, the Histogram gives you no clue about the width, but only about the position
of the price between the band. Therefore, I have taken a closer look at both indicators
together to see if any relationship could be discerned.
As a result, what I would like to have is the following: rising volatility (rising BWI,
possibly further a trigger level) + extreme readings (over 2, or below -2) of the
Histogram. This would give a clue of the direction AND the strenght of the trend. I
would sell low readings of Histogram, and buy high readings.
On the other hand, if extreme readings of the Hisogram occur at low BWI levels, this
would rather mean that the trend is weak and a reversal is possible.
Alberto Torchio
Torino, Italy
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