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Brad D. wrote:
>
> I recently received the latest sales offering from Reality Based
> Trading Company (actually, it's the 1998 products catalog, apparently
> issued prior to Bruce Babcock's death). Has anyone used his "Dynamic
> Trend Analyzer" indicator for TradeStation and SuperCharts? It's an
> expert system (it provides commentary) and defines the trend in four
> different time frames.
>
> I'd be interested in hearing comments regarding it's effectiveness,
> and if anyone knows, the concept(s) behind the indicator.
I bought this (as I recall it was quite inexpensive). I've made some
comments, tho pls filter them knowing that I am a 3 yr., not-yet
successful, small trader who is certainly not a system expert.
The indicator produces commentary as you mentioned, and also can color
the bars according to the trend. For the latter you would have to pick
one timeframe or plot multiple copies of the data in your graph. (There
is some explanation of this in the instr. manual that comes with it.)
The indicator does come locked but the someone who I believe was a
programmer at Babcock's company was kind enough to fax me the logic
behind the indicator.
The trend is based on 2 indicators: a slightly modified DMI, and
momentum. In several of the trend-lengths there is some additional
logic about the last few bars. In *one* of the trend-lengths, the
indicator did not appear to function as the logic said it did. It may
be that there had been a revision, or could be a coding error. I had
intended to mention this to the programmer but have not.
The commentary suggests buying new high/lows when the 3 shortest trends
agree. In the little bit that i looked at these "signals", they seemed
late. Buying new highs is a time tested method, and so is trend
following. But waiting for the three trends to all be +, and then
waiting further for a new high, gets you in awfully late in some
trends. Of course the whole idea of the indicator is to only trade when
the trend is definately in force. And it's unavoidable that some trends
will meet any given criteria just before they stop.
The indicator does not put arrows on the chart (you have to look at the
commentary), and is not formally a TS *system* so the buy/sell signals
from the commentary can't be quickly tested, except bar by bar.
Looking at just the longterm trend on the colored bars showed that this
did a pretty good job of defining the major trends and riding out minor
retracements. It would be interesting to tabulate the results of
trading on that alone. It also might be as effective in announcing the
trend as another much more expensive bar-coloring indicator is (ASCTrend
which I don't have; note that ASCTrend includes stops which Babcock's
does not).
A interesting question would be: is it better to enter (long) when all
trend lengths agree (+++) or is it better to allow other variations like
+-+ (resumption of trend after a pullback) or even ++- (using a stop-in
technique perhaps) ? With the Babcock paintbar indicator, this would be
quite easy to test (assuming the logic error if it exists, is corrected)
visually, and with a little programming as an entry system.
Altho I am not using the indicator any more, I don't begrudge the
relatively small price I paid to look at one way an important systems
person viewed the markets. And it motivated me to include a
multitimeframe detn. of the trend on my charts.
Conrad Bowers
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