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Ian:
Thanks for this posting.
The DMO gives about the same signals as your mov average oscillator. The
whipsaws would be reduced by applying a short moving average to the DMO.
This comparison confirms Chande and Kroll's remarks in the "New Technical
Trader" that all price-only oscillators (aka indicators) are highly
correlated.
Lionel
-----Original Message-----
From: Ian Burgoyne <iburgy@xxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: Monday, September 14, 1998 2:26 PM
Subject: Re: Changes in Trend
>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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