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Rt'ers
Just thought I would post an update to let everyone now what's
going on in the evolution of FEAR!
First, to all of you that are expending time and energy working
with the indicator, your input is greatly appreciated !
Available information on the indicator is expanding at an
amazing exponential.
Here is what we are finding out:
As most of you have noticed, FEAR! is designed to adjust to
current market conditions. To a certain degree, the FEAR
and FEARfast can be considered support and/or resistnce.
HOWEVER..... there seems to be a lot of confusion on the
use of the FEAREnv. The current situation in bonds is a good
example. What the FEAREnv is telling you is that, at these
levels, everytime bonds move higher, it must "carry" the
FEAREnv with it. A lot of traders (the ones who I suspect
are currently long bonds :) ) have commented that the
market is moving higher, while blissfully ignoring the fact
that everytime Bonds have hit the FEAREnv level, it has been
good for a 6 to 10 point reversal before bonds recover.
It is also my contention that, when bonds finally fold, it will
be good for 1 to 2 full points. Does this mean that I am betting
the house on bonds falling? I NEVER bet the house on anything!
But, I am collecting options. And I have, and probably will
continue to fade the bonds whenever it pops the FEAREnv level
intraday.
INTRADAY TRADING:
I personally think it is better to use the plot values from
the DAILY chart as intraday trading levels.
However, some people that are playing around with the indicator
on realtime intraday charts are having some interesting results.
I have looked at quite a few offline intraday charts using
FEAR!, and find that the FEAREnv has some problems holding
the market back. I believe this is because a person holding
$300 in profit or loss experiences a lot les fear than a person
holding a $3000 gain or loss!
I have a query for those looking at fear on intraday "live"
charts. What kind of bounce are you getting off the various
plots as the market moves around? I would love to know.
There are some things I could try in order to strengthen
the FEAREnv for live intrady trading.
General Information:
So basically, where we are at with FEAR!! right now is that
it looks cool, and SEEMS to be working pretty well.
The next step is to establish some sort of historical testing
structure so that we can "prove" the veracity of the indicator.
To that end, Clyde Lee has kindly offered his help. Clyde seems
to be on the ball in his EL programming, and I am confident that
if we get enough people working on this, we will be able to come
up with a "Living" system for a "living " indicator.
In closing, the following is a basic synopsis of the indicator and
how it functions:
The scaling. The idea behind the use of the indicator in
this scale is to create, in effect, a "living" indicator. When you
look back in time on a daily chart, you will notice the FEAREnv
confirming most of the highs and lows, and you will also see the
validation of the various breakout levels, as the market passes
through the various plots. The indicator is giving you active
feedback, saying " My signals are still valid" So, in theory (And
in practice, for me :) )You know that the market hasn't changed
and the indicator should still be tradable.
So, how does this differ from curve fitting a system?
The difference
lies in the fact that the indicator is allowed to adjust as it
receives new price data! For example : If I were to look at the
results the indicator showed over the past 6 months, and based on
those extrapolations, I then wrote and applied a system, the system,
now having set mathematical parameters it MUST follow, is
eventually doomed to fail. When the market changes it's temperament,
the system won't change with it.
So the idea I'm shooting for is this: Since the indicator is allowed
free reign to change as it receives new data, if the market starts
to change, the indicator simply will not isssue a signal based on
the old parameters. In effect, keeping the trader out of a market
that has changed it's temperament.
What I am really anxious to see
is if the indicator, when faced with a market that has changed, will
MUTATE, and generate a new standard of signals, in effect giving
the trader a road map to trade the market.
Yes, if the market applies enough force to the FEAREnv, it will
move. But remember, fear doesn't go away, Every day that the
market attempts to move higher, it will be forced to "push"
the FEAREnv with it.
So, the REAL question at this point is whether or not the FEAREnv
is strong enough to drive back a strong market.
I have been fortunate in that currently there are 4 or 5 markets
that are testing the FEAREnv: Bonds, OJ, Cotton, the S&P.
If you will look at the dailies, you will have to admit that these
markets DO seem to be having trouble making headway against it.
I think Bonds will be the sternest test.
If several of these markets do break through, I will increase the ratios
of the FEAREnv to see if that strengthens it.
The main problem right now is in historically testing it! How do you
test an indicator that constantly changes!? That is what I am
working on right now.
The only historical testing to date is my own trading. And "walk
throughs" going trade by trade on TS charts.
I have traded signals from the FEAR indicators "real time
and "real money" five times.
Results: 4 winners and 1 loser.
Any comments, input or ideas are encouraged.
Walt :)
FEAREnv is dynamic, and
the market will have to drag it around like a ball and
chain until it figures out what to do with it.
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