|
PureBytes Links
Trading Reference Links
|
You've asked the million dollar question. If one had a reliable indicator that would signal whether a security was entering a sideways-cycling phase or was entering a trending phase then he or she could make a lot of money. Upon getting a consolidation (sideways movement) signal one would then start to rely upon oscillating type indicators such as RSI, CCI, ROC, Stochastics.... and look to sell whenever the security reached overbought territory (e.g., > 70 for RSI) and buy whenever the security reached oversold territory (e.g., < -100 for CCI). Or selling double tops and buying double bottoms.
Upon getting a signal that the security was entering a trending phase, then one would switch to indicators such as Moving Averages, Linear Regression Slope and/or Trendline, Time Series Forecast..... Or my favorite - buying breakouts.
Traditionally the ADX indicator is used more often than not to indicate whether a market is trending or cycling. Most analysts will say when ever the ADX rises above 25 the underlying security is probably trending. Another is the Consolidation Indicator:
Periods:= input("Periods", 10,250,50);
Pr:= (H+L)/2;
100* (HHV(PR, Periods) - LLV(Pr, Periods))/LLV(Pr, Periods))
Where readings below 25 tend to indicate the security is in a sideways phase. You could try and exit your trading strategy whenever the ADX or the CI falls below 25. And resume whenever the indicator goes above 25.
In the old Central Indiana Tradestation Users Group was a fellow from Crawfordsville, IN named Randy Stucky. Randy at that time developed the first edition of his Catscan Trading Program (he is now up to Catscan IV). For at least a decade now Catscan has remained one of the top ranked trading software programs for a whole range of commodity futures. Don't hold me to this but I believe Catscan takes the Log of the Lowest 50-day Low from the Log of Highest 50-day High and then if that number is below a certain low (around .10), then Catscan would use something like RSI to trade. Above that number Catscan would buy/short breakouts. Besides a general number which worked well over a whole range of commodities, Catscan also had different cycle/trending numbers for individual commodities depending upon what commodity you're trading. For a slow moving commodity like the Canadian Dollar that cutoff number would be around .06. For a more volitile market such as the NASDAQ the cutoff trend/cycle number would be higher, aound .15.
Finally if you do think you have a tradeable system, I always recommend you try it out on the Japanese Yen. If your system cannot produce a profit when tested on the Yen, then chances are it needs more work. Of all the different vehicles one can trade (stocks, mutuals, ETF's, futures, etc.) I have yet to find one more tradeable than the Yen. The reason for this is that the Yen tends to trend. If you don't have a source for historical Yen price history then at least test your system on the Yen EFT - FXY. You can download the FXY's daily history (from Feb 13, 2007) from Yahoo for free.
To: equismetastock@xxxxxxxxxxxxxxx
From: mahiya001@xxxxxxxxx
Date: Thu, 21 May 2009 17:26:09 +0530
Subject: [EquisMetaStock Group] PREV
hi,
i m working on designing mechanical trading system.
my system catches swing high and swing low setup
it works well in a trending market, but in sideways it gives many wiphsaws
so can anybody suggest me how to bifurcate trending and ranging price movements on 5 min chart
Regards,
Nikhil
|
Explore and discover exciting holidays and getaways with Yahoo! India Travel Click here!
__._,_.___
![]()
__,_._,___
|
|