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Owen,
What is legitimate is to define what % swing is significant for any
security.
Having decided that a swing of x % is significant, for whatever time frame
you are studying, you can then draw x percent swings on your chart, and as
they develop clock the recent turning point.
You can be certain that this is purely mechanical, at the current time, and
does not rely on any discretion of interpretation.
Swing traders do this all the time. Read Robert Krauz, or Robert Miner in
Dynamic Trading.
Regards, Simon
-----Original Message-----
From: Owen Davies <owen@xxxxxxxxxxxxx>
To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
Date: 24 July 2001 05:37
Subject: Re: LinRegSlope divergence
>Yarroll asked:
>
>> Please have a look at the formulas:
>>
>> Buy long: divergence(C,LinRegSlope(C,2),0.01)=-1
>> Sell short: divergence(C,LinRegSlope(C,2),0.01)=1
>>
>> They are very profitable in tests, just too good to be true. That's
>because
>> it is... Tests results back-adjust themselves (etc.)
>
>This reminds me of a problem I ran into a while back. Reasoning that a
peak
>or trough, once established, ought to remain a peak or trough, I decided to
>see whether one could make a profit by taking action after the change of
>direction had been recognized. So I wrote a system that said, in effect,
>"Take a position after the price has moved X points down from the peak
>or up from the trough," where X was the size of the move required to
>establish
>that a peak or trough had been made. Worked like a charm! Except, of
>course, that when I looked at it on short intraday bars, about once a week
>it
>would decide that a bunch of peaks and troughs had never happened, and
>the up or down trend had been continuously in effect since almost forever.
>If I'd actually been trading, significant money would have gone the wrong
>direction.
>
>So, fine. Now I accept that there is no way around the peak/trough
problem.
>Yet I can't help thinking that a peak (or trough) established by prices X
>percent
>lower (or higher) on either side ought to remain a peak or trough, no
matter
>what else happens later. Can anyone explain what it is about the way the
>relevant
>functions are written that invalidates this reasoning? Or direct me to a
>resource
>that will explain it to me, in very small words?
>
>Many thanks.
>
>Owen Davies
>
>
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