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Jim,
I had a look at the Directional Movement Oscillator(DMO) and as you
suggest there
is a lot of whipsawing which lessens the effectiveness of the indicator.
I applied a 10 day exponential moving average to the DMO which helped to
smooth it and then displaced the MA back three periods. The MA of the
DMO seems to give a clearer signal with less whipsaws. I've attached a
.gif of Newscorp which compares the DMO and the MA of the DMO in the
inner windows and you'll see what I mean. What are your thoughts?
Regards
Ian Burgoyne, Melbourne
Wooglinx@xxxxxxx wrote:
>
> Steve Karnish wrote: <snip ---snip>
> I've started to play with the indicators. It's been years since I sat across
> the table from Welles Wilder...but I use his indicators everyday. I just
> haven't really incorporated ADX in anything I do. I think there is something
> here...that something could be somewhat subjective.
>
> How does one teach subjective gut feelings? I look at many
> objective indicators and then have to dig deep inside to pull the trigger.
> I'm not sure that part can be defined or taught. <snip - snip>
>
> And John Hunter asked "What indicators are useful in predicting the end of a
> trend?"
>
> IMHO, Wells Wilders +DI and -DI can predict changes in trend quite well. (See
> pg 434 of MS 6.5 manual).
>
> Create a new indicator and let's call it "Directional Movement Oscillator".
> The DMO formula is as on page 434, i.e.,
>
> pdi ( 14 ) - mdi ( 14 ).
>
> Bring up the indicator over an index such as the DJIA or S&P 500, etc. Left
> click on the indicator line and right click to bring up "Properties". Insert a
> horizontal line on the indicator at a value of zero. Then change the
> Color/Style of the line to a histogram Style. If you like you can save the
> chart as a "Template".
>
> Next compare the histogram to the underlying index. You should see that the
> zero cross over points on the histogram correlate very well with the changes
> in trend of the index. For the DJIA, the crossover to a down-trend occurred on
> July 23, 1998 and has not made any attempt to suggest an up-trend is in the
> offing near term.
>
> As you might expect, using this approach for trades in a market with short
> term narrow oscillations would be disastrous.
>
> I am currently writing a System Test to test trading off the cross-overs. In
> addition, I am looking for a refining indicator that would act as a filter to
> pick up only the major trend changes and hence reduce whip-sawing. Any help or
> thoughts out there on filters (Either additional indicators or manipulation of
> the DMO itself).
>
> Special note to Jim Greening. The HMO histogram applied to RDC shows that a
> reversal in trend MAY be about to occur. More importantly is the pick-up in
> volume as RDC hit its low. The volume may have been due, in part, to the
> appearance of RDC's Chairman on CBNC recently.
>
> Jim Barone
>
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