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Preston,
Thank you again for filling in more of the puzzle. I will keep
playing with DMX, armed with the better understanding you have given me and
will see what I can come up with. Again my sincere thanks for your help and
patience.
But my essential interest is with the DMZa and DMZb codes. I
understand that they are the same indicator and I also understand how they
are normally interpreted. But I am finding that 'a' plots differently to 'b'
and I assume this must mean that the lag is slightly different in both
indicators.
I would like to be able to send you a chart to demonstrate this, but
as they come together, cross and diverge, their movements with respect to
each other, appear to correlate with and possibly anticipate price
movements. So I wanted to test to see whether this was more universally the
case or whether by some extreme chance, the correlation I was seeing in
several dozen charts was illusory.
Which is why I wanted to code as separate indicators, 'a' crossing
above 'b' and 'b' crossing above 'a'. And why I am astonished and confused
when applying the Cross function to the DMZa and DMZb, it is signaling on
occasions a cross over when visually the two lines have not crossed.
So for me it is rapidly falling into my basket of great unsolved
metastock mysteries. But I continue to plot the DMZa and the DMZb in the
same window and I continue to see an apparent correlation between their
movements with respect of each other and share price. Of course the litmus
test will be to actually use this apparent correlation as the basis for
trading, but I had hoped to historically test it first.
Kevin
-----Original Message-----
From: notify@xxxxxxxxxxxxxxx [mailto:notify@xxxxxxxxxxxxxxx] On Behalf Of
kevinh5066
Sent: Thursday, 30 March 2006 1:19 PM
To: kjhoward@xxxxxxxxxxxxxx
Subject: Fwd: Re: DMX
--- In equismetastock@xxxxxxxxxxxxxxx, pumrysh <no_reply@xxx> wrote:
Kevin,
Glad to hear that you've got the indicators working.
Let me explain a bit about them so that you have a better
understanding of their use. The DMZa, DMZb, and DMX are all the same
indicator. They are each written a little differently. Here's what I
wrote about the DMI back in August of last year.
Description:
The Dynamic Momentum Index (DMI) was developed by Tushar Chande and
Stanley Kroll. The indicator is covered in detail in their book The
New Technical Trader.
The DMI is identical to Welles Wilder's Relative Strength Index
except the number of periods is variable rather than fixed. The
variability of the time periods used in the DMI is controlled by the
recent volatility of prices. The more volatile the prices, the more
sensitive the DMI is to price changes. In other words, the DMI will
use more time periods during quiet markets, and less during active
markets. The time periods the DMI can reach is around a maximum of
30 and a minimum of 3. The volatility index used in controlling the
time periods in the DMI is based on a calculation using a five period
standard deviation and a ten period average of the standard
deviation. The advantage of using a variable length time period when
calculating the RSI is that it overcomes the negative effects of
smoothing, which often obscure short-term moves.
In this indicator the option to use a bipolar index is also
introduced. The formula for a bipolar index is Bipolar =( up -
down ) / ( up + down )
Interpretation:
Chande recommends using the DMI much the same as the RSI. However,
because the DMI is more sensitive to market dynamics, it often leads
the RSI into overbought / oversold territories by one or two days.
Like the RSI, look for overbought (bearish) conditions above 70 and
oversold (bullish) conditions below 30. However, before basing any
trade off of strict overbought/oversold levels using DMI or any
overbought/oversold indicator, Chande recommends that you first
qualify the trendiness of the market using indicators such as r-
squared or CMO. If these indicators suggest a non-trending market,
then trades based on strict overbought/oversold levels should produce
the best results. If a trending market is suggested, you can use the
DMI to enter trades in the direction of the trend.
Notice in the explanation that the DMI is identical to the RSI, the
difference being the use of volatility to set the lookback periods
of what would be the RSI periods. Normally we would set the RSI at a
lookback period of 14 days. In the case of the DMI we instead rely
on volatility to set the lookback periods. This is a concept that
could easily be used in other indicators. Since you have mentioned
the TRIX, let's use it and write an indicator that would use this
concept.
{(DTX)Dynamic TRIX}
{written by Preston Umrysh}
{This indicator uses Dll software developed by MetaStock Forum Crew}
{http://forum.equis.com)}
Vt:=(Stdev(C,5)/Mov(Stdev(C,5),10,E))*10;
Vt:=Max(vt,.0000001);{sets volatility periods}
Period:= Input("ZeroLag Period",1,250,10);
EMA1:= Mov(C,Period,E);
EMA2:= Mov(EMA1,Period,E);
Difference:= EMA1 - EMA2;
ZeroLagEMA:= EMA1 + Difference;
x:=ZeroLagEMA; {smooths the closing value}
ExtFml( "Forum.TRIX", X{Data Array}, VT{Periods})
{end}
Notice that the only change made was with the last line. Not a very
good indicator for a number of reasons. What about a CCI?
{(DCCI)Dynamic CCI}
{written by Preston Umrysh}
{This indicator uses Dll software developed by MetaStock Forum Crew}
{http://forum.equis.com)}
Vt:=(Stdev(C,5)/Mov(Stdev(C,5),10,E))*10;
Vt:=Max(vt,.0000001);{sets volatility periods}
Period:= Input("ZeroLag Period",1,250,10);
EMA1:= Mov(C,Period,E);
EMA2:= Mov(EMA1,Period,E);
Difference:= EMA1 - EMA2;
ZeroLagEMA:= EMA1 + Difference;
x:=ZeroLagEMA; {smooths the closing value}
ExtFml( "Forum.Cci",vt)
{end}
Again, the last line was the only one changed. There is a difference
that needs to be mentioned here though. We can only input a value
for the lookback periods as this formula does not allow us to use
anything other than the close for our data array. If we want to
smooth the close we would have to rewrite our formula in a longhand
version in order to smooth the close. I'll leave that for another
time but I think you get the idea.
For now though let's focus on the other part of your question. How
should we trade the DMI or DMX ? Trade it the same way that you
would a RSI. You could trade a cross above a moving average of the
indicator or simply when the indicator was above/below a certain
level. That is something that you will have to decide.
Finally, as far as your feeling inadequate, don't be too worried at
this point. You are doing the right thing by asking questions and
trying to resolve your problems. Hope all this has helped. Let us
know how its going.
Preston
--- In equismetastock@xxxxxxxxxxxxxxx, "Kevin and Heather Howard"
<kjhoward@> wrote:
>
> Hi Preston,
>
>
>
> Many, many thanks for your comments and help. I now
have (DMZ)
> Dynamic Momentum Index running and it seems to plot very closely
but not
> exactly with Xb.
>
>
>
> I don't quite understand what you mean by changing the
data
> array and the variable period. I sense it means altering the Vt:
and x:
> lines in the DMZ indicator code, but could you show me what you
mean by
> changing the DMZ Indicator code to perform another function.
>
>
>
> For example, after using the Function button in the Indicator
Builder (and
> again thank you for showing me how that works), there are some 30
Paste
> Functions shown against Forum. Now if I wanted to set up the DMZ
Indicator
> code to perform variable Trix functions, I see what I have to
paste in the
> last line of the code, but what do I put against vt: and x: ?
>
>
>
> I sense that Forum may expand my horizons considerably so I would
be really
> grateful if you could give me some more help with it.
>
>
>
> With regard to Xa and Xb, they have so puzzled, that my head
hurts. They
> look fantastic when plotted, particularly on Indices, but I just
can't seem
> to write a code that works for capturing the cross over point. It
probably
> was not intended that you should overlay one on the other, but I
cannot see
> why the Cross function should not work. Both indicators are giving
similar
> numerical values.
>
>
>
> The problems I have with the code I have written is that
invariably the
> cross over points indicated are one or two bars after Xa and Xb
have
> crossed, but sometimes I am getting a cross indicator firing when
no cross
> has taken place. That has me absolutely baffled.
>
>
>
> The code I am using to reflect a buy is:
>
>
>
> Cross(Fml("Dynamic Momentum Xb (DMX)"),Fml("Dynamic Momentum Xa
(DMX)"))
>
>
>
> And the sell is :
>
>
>
> Cross(Fml("Dynamic Momentum Xa (DMX)"),Fml("Dynamic Momentum Xb
(DMX)"))
>
>
>
> And the point of setting the buy and the sell up as separate
indicators is
> so I can do some back testing of this approach.
>
>
>
> I really feel so very inadequate with all of this but I am trying
and I will
> keep trying to get on top of it, if for no other reason than I do
not want
> to fall behind as Metastock continues to develop.
>
>
>
>
>
> Kevin
>
>
>
>
>
>
>
>
--- End forwarded message ---
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