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Macd Relative Strength Ratio:
This is an idea created by Gilbert Raff in the Nov. 1994 issue of Technical
Analysis of Stocks and Commodities. It is meant to be use on End of Day
charts, for stock pickers and/or mutual funds.Essentially, it tries to pick
stocks/funds that will outperform the S&P index.
Take the Close of Data1 and divide it by the Close of Data2 (which is the
S&p index).
This will give you the relative strength of the stock/fund to the S&P
index. It is NOT the same thing as Welle's Wilder's RSI. The idea is to see
if the issue is currently outperforming the S&p or not. In a market
downtrend, it only will tell you wether or not the issue is declining at a
faster rate than the S&P.
Then impose the MACD on the ratio of issue divided by the S&P. Use that for
your buy/sell decisions. There are many variations on what can be done.
Listed below is my variation on what can be done; you can do it
differently.
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{indicator: Macd RS Ratio}
Inputs: R(12),S(26),Q(9),Price(close of data1/close of data2);
Vars: Mo(0),Avg(0);
Mo=MACD(Price,R,S);
Avg=Xaverage(MACD(Price,R,S),Q);
Plot1(Mo,"Momentum");
Plot2(Avg,"Avgerage");
Plot3(Mo-Avg,"Difference");
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{system: Macd RS Ratio};
Inputs: R(12),S(26),Q(9),Price(close of data1/close of data2);
Vars: Mo(0),Avg(0);
Mo=MACD(Price,R,S);
Avg=Xaverage(MACD(Price,R,S),Q);
Condition1=Mo crosses above 0;
Condition2=Mo crosses below 0;
Condition3=Mo>0;
Condition4=Mo<0;
If Condition1 then buy 1 contract on close;
If Condition2 then sell 1 contract on close;
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Macd RS Ratio Daily3 Dell Computer Corporation-Daily 05/02/96 - 04/01/98
Performance Summary: All Trades
Total net profit $ 19.50 Open position P/L $ 24.97
Gross profit $ 33.21 Gross loss $ -13.71
Total # of trades 8 Percent profitable 38%
Number winning trades 3 Number losing trades 5
Largest winning trade $ 24.03 Largest losing trade $ -5.94
Average winning trade $ 11.07 Average losing trade $ -2.74
Ratio avg win/avg loss 4.04 Avg trade(win & loss) $ 2.44
Max consec. winners 1 Max consec. losers 3
Avg # bars in winners 105 Avg # bars in losers 12
Max intraday drawdown $ -12.53
Profit factor 2.42 Max # contracts held 1
Account size required $ 12.53 Return on account 156%
Performance Summary: Long Trades
Total net profit $ 28.71 Open position P/L $ 24.97
Gross profit $ 33.21 Gross loss $ -4.50
Total # of trades 4 Percent profitable 75%
Number winning trades 3 Number losing trades 1
Largest winning trade $ 24.03 Largest losing trade $ -4.50
Average winning trade $ 11.07 Average losing trade $ -4.50
Ratio avg win/avg loss 2.46 Avg trade(win & loss) $ 7.18
Max consec. winners 3 Max consec. losers 1
Avg # bars in winners 105 Avg # bars in losers 8
Max intraday drawdown $ -5.44
Profit factor 7.38 Max # contracts held 1
Account size required $ 5.44 Return on account 528%
Performance Summary: Short Trades
Total net profit $ -9.21 Open position P/L $ 0.00
Gross profit $ 0.00 Gross loss $ -9.21
Total # of trades 4 Percent profitable 0%
Number winning trades 0 Number losing trades 4
Largest winning trade $ 0.00 Largest losing trade $ -5.94
Average winning trade $ 0.00 Average losing trade $ -2.30
Ratio avg win/avg loss 0.00 Avg trade(win & loss) $ -2.30
Max consec. winners 0 Max consec. losers 4
Avg # bars in winners 0 Avg # bars in losers 14
Max intraday drawdown $ -10.15
Profit factor 0.00 Max # contracts held 1
Account size required $ 10.15 Return on account -91%
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