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Alex:
Yes, this works up to a point.
However since price movement of securities is log normal, a $6 to
$12 move is +100 percent, however a -100 percent move would
require the price to go to zero dollars. It would get delisted
long before that. This is the reason why a +50% move is common;
a -50% move is rare.
Bottom line, stocks that have not been delisted just yet have an
upward bias. Eventually, they are delisted, merged, or change
symbols, so the bias is corrected. :-)
Leslie
Alex Matulich wrote:
>
> >I have one of these but it fails to adjust for radical price
> >movement (if anyone wants it I'll send it along).. so it works fine
> >for futures but if say MSFT was at $6 the oscillator will return an
> >entirely different range of values than it will when MSFT = $50 so
> >I can't backtest over a 3-8 year period for stocks that had a wide
> >price move. Has anyone tried to solve this flaw or seen a solution
> >posted somewhere?
>
> A solution might be to run the oscillator on LogValue(price) rather
> than just the price. This converts price to something proportional
> to percentage gains and drops rather than dollar gains and drops.
> The price fluctuations of a stock around $6 will then be the same
> (in percentage terms) as the price fluctuations of the same stock
> around $50.
>
> --
> ,|___ Alex Matulich -- alex@xxxxxxxxxxxxxx
> // +__> Director of Research and Development
> // \
> // __) Unicorn Research Corporation -- http://unicorn.us.com
--
Regards,
Leslie Walko
610-688-2442
--
"Life is a tragedy for those who feel, a comedy for those who
think"
Horace Walpole, 4th earl of Orford, in a letter dated about 1770
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