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Re: Trading the Trends


  • To: "Metastock List" <rajesh@xxxxxxxx>
  • Subject: Re: Trading the Trends
  • From: "A.J. Maas" <anthmaas@xxxxxx>
  • Date: Mon, 24 Aug 1998 00:29:43 -0400 (EDT)

PureBytes Links

Trading Reference Links

>Do you have the exploration and the indicator ready? Would you be kind
>enough to mail the file?

With Andrews description and the formulas below there should not be any
problem writing the next in Metastock. Will do the first one.
1.-the indicator(incl. the colored bars)
2.-its accompaning Exploration
3.-and Experts

TTT-TREND TRAILING Ind - Andrew Abraham
{from TASC article SEP98 - TRADING THE TRENDS}
VOLAInd :=Mov(ATR(21),1,W)*3;
If(
C>Ref(C,-21) AND C>VOLAInd,
HHV(H,21)-Ref(VOLAInd,-1),
Ref(VOLAInd,-1)+LLV(L,21))
{CHANGE BAR COLORS:
double click on the price plot in the chart, from the Color/Style page
click the UP drop-list and choose darkblue for upwards, and red for
downward price changes}

Regards,
Ton Maas
Ms-IRB@xxxxxxxxx

=========================================================

(Wilder's) True Range - see also Average True Range - see also William's A/D

Description :
This function creates an array containing for each day, the
higher of the following differences :
Between today's high and today's low.
Between today's high and yesterday's close.
Between today's low and yesterday's close.
The value of tr() for any day is always positive or zero.

=========================================================

Average True Range - see also (Wilder's) True Range

In his book, New Concepts In Technical Trading Systems, Wilder defines a trading system
that uses the Average True Range.
He also provides details on calculating the Average True Range and the trading system.
The Average True Range also can be interpreted using the same techniques that are used
with the other volatility indicators.  Refer to the discussion on Standard Deviation for additional
information on volatility interpretation (see Standard Deviation).

Interpretation
The True Range indicator is defined by Wilder to be the greatest of the following for each period:
· The distance from today's high to today's low.
· The distance from yesterday's close to today's high.
· The distance from yesterday's close to today's low.
The Average True Range is simply the average of the true ranges over the past x periods
(where x is specified by the user).

Parameters
The parameters for the Average True Range are shown below.  These parameters are specified
at the time the indicator is plotted.  You can edit the parameters of an existing plot by right-clicking
on the indicator and choosing Properties from the shortcut menu.

Time Periods.  Enter the number of time periods to use when calculating Average True Range.
The term "time periods" refers to days if the chart contains daily data, weeks for weekly data, etc.

Custom indicator
SYNTAX atr( PERIODS )
FUNCTION Calculates the predefined Average True Range indicator.
EXAMPLE atr( 20 )

=========================================================

Williams' Accumulation/Distribution

To simplify the explanation of this formula, we will enter it as three formulas nested in the indicator.
The first statement assigns the "true range" of the high to a variable.
Similarly, the second formula assigns the "true range" of the low to a variable.
The third statement calculates Williams' A/D indicator.

TrueRangeHigh:=max( ref(close,-1), high );
TrueRangeLow:=min( ref(close,-1), low );
cum(if(C  > ref(C,-1),C-TrueRangeLow, if(C < ref(C,-1),C-TrueRangeHigh,0)))

==========================================================
Wilder's Volatility

rev. 01/06/97

In his book New Concepts in Technical Trading Systems, J. Welles Wilder Jr.
talks about volatility and describes his Volatility Index and Volatility
System. Both of these can be performed in MetaStock™ for Windows version
6.0. This document describes how to construct both the index and the
system.

The Volatility Index (VI) is described by Wilder as:

VI Today = (13 * VI Prev + TR1) / 14 *where TR1 is today's true range.

He defines the true range as the greatest of the following:

  1. The distance from today's high to today's low
  2. The distance from yesterday's close to today's high, or
  3. The distance from yesterday's close to today's low.

In MetaStock version 6.0 or higher you would use the Prev function and a
one period Average True Range to construct the Volatility Index. The custom
formula is written as:

VI Today = (13 * Prev + ATR(1)) / 14
=========================================================

Relative Volatility Index (RVI)

rev. 01/06/97

The following formulas were taken from the article "The relative volatility
index," written by Dorsey, Donald, in the June 93 issue of Technical
Analysis of STOCKS & COMMODITIES.

Taken from Stocks & Commodities, V. 11:6 (253-256): The Relative Volatility
Index by Donald Dorsey

"The RVI is simply the relative strength index (RSI) with the standard
deviation over the past 10 days used in place of daily price change.
Because most indicators use price change for their calculations, we need a
confirming indicator that uses a different measurement to interpret market
strength. The RVI measures the direction of volatility on a scale of zero
to 100. Readings above 50 indicate that the volatility as measured by the
10-day standard deviation of the closing prices is more to the upside.
Readings below 50 indicate that the direction of volatility is to the
downside. The initial testing indicates that the RVI can be used wherever
you might use the RSI and in the same way, but the specific purpose of this
study is to measure the RVI's performance as a confirming indicator."

The RVI was designed to measure the direction of volatility. It calculates
price strength by measuring volatility rather than price change.

All of the following formulas are required:

@RVI Down

((PREV*13)+If(ROC(C,1,%)<0,Stdev(C,10),0))/14

@RVI Up

((PREV*13)+If(ROC(C,1,%)>0,Stdev(C,10),0))/14

@RVI

(100*Fml("@RVI Up"))/(Fml("@RVI Up")+Fml("@RVI Down"))

=============================================================

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