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Hi Philip,
This is, to some extent, a fundamental problem in technical
analysis. If the market trends, then we can react quickly
to sharp movements knowing that a new trend is just starting.
If the market cycles at the moment, then we do exactly the
opposite as we know it will return to normal. The problem
is that the answer to this question, is the market trending
or cycling, we can only answer after some lag.... So we
can not enter at the bottom, we are still speculating.
I've used Raff regression channels and trend lines to try
and answer this question. Optimization also is key, as you
can then get a feel for what worked historically. I once
built a simple indicator working on the first difference of
the price. This is, of course, an approximation of the
current 'slope' of the price series and thus supposed to
turn sharply before the market does. It worked well from
what I remember, but this was year ago.
Another way to address this is to use something like statistical
arbitrage. While you are still unsure about the trend, you
enter both ways and, when sure, close the one leg. This is a
nice, low risk way of keeping your options open....
Regards
MG Ferreira
TsaTsa EOD Programmer and trading model builder
http://tsatsaeod.ferra4models.com
http://www.ferra4models.com
--- In equismetastock@xxxxxxxxxxxxxxx, Philip Schmitz
<pschmi02@xxxx> wrote:
>
> Greetings All,
>
> By the time many of the more popular trend indicators kick in
(moving
> averages of various flavors and combinations, the MACD, the ADX
and even
> the PDI/MDI) the trend itself can often be nicely underway. This
seems to
> apply especially when price action takes a sharp turn, as in a "V"
bottom
> or an inverted "V" top. The numbers feeding into the calculation
of the
> indicators cause a lag. Gradual changes in direction don't seem to
pose a
> problem.
>
> I'm not trying to call tops and bottoms, but even a minor jump on
> conventional trend indicators would be helpful. To date, my
efforts to get
> a handle on the initial phase of trends after sharp market turns
have not
> been rewarding. I can't seem to conceptualize it. Can anyone point
me in
> the direction of published thoughts on how one could approach this
kind of
> market action? Or, would you be willing to share some basic
observations of
> your own? I can't imagine that this question hasn't occupied many
traders
> at one time or another.
>
> If I should simply "fugeddaboudit," well, that's a possibility
too. I may
> be cross-posting this inquiry. My apologies in advance.
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