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> I haven't seen the article, nor do I know the exact definition of
> the Metastock ROC function. But I can tell you why you're
> getting large spikes when you use ROC (RateOfChange on TS2001i).
>
> RateOfChange is defined as Price / Price[Length] - 1. That
> generally works fine when you're using actual price values. But
> the Fisher transform you're passing to it crosses through zero --
> sometimes very close. When Price[Length] is very near zero, the
> resulting ROC calculation is a huge number.
>
> You could try using Momentum instead of RateOfChange. Momentum
> is Price - Price[Length]. No division-by-zero problems. But it
> doesn't look like a particularly good signal line to show turning
> points.
>
> This Fisher transform is kind of odd. Looking at the code,
> Value1 is just a smoothed Stochastic re-centered around zero.
> Then he takes log((1+Value1)/(1-Value1)) and smooths that. I'm
> not sure what the log calculation is supposed to accomplish. It
> basically just amplifies the smoothed stochastic, exaggerating
> the points where the stoch approaches +/- 1. He pegs the extreme
> values of value1 at +/- 0.99, which ends up limiting the Fisher
> value to +/- 5.29. Why? Beats me. Guess he wanted to make it
> really obvious when the stoch value was approaching its max/min
> values.
Thank you for your comments. I may post about this later.
Apparently the limits are imposed to prevent value1 exceeding its 10 (
len) day range and crashing due to having a zero in the denominator.
The exaggeration around the +/-1 points is to simulate the Probability
Density Function of a sine wave. or something - don't ask, it's beyond
me! (:-) If you sample a sine wave, you can see that most of the points
are going to be at the top and bottom of the curve.
Ian
> > He also talks about another plot: "I multiplied the rate of change
> > of the Fisher Transform by 10 and plotted this amplified rate of
> > change over the Fisher transform." The crossings show turning
> > points.
> >
> > However, I have not been able to duplicate the ROC plot correctly.
> > In Trader's Tips, the MetaStock code is simply given as:
> > 10*ROC(fish,1,$)
> > I've tried a few variations including:
> > Plot4(10*RateOfChange(fish, 1));
> > but they simply create spikes consisting of very large numbers.
>
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