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Slope of an indicator, frustrating =/
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Slope of an indicator, frustrating =/

  #41 (permalink)
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No chop indicator


Fat Tails View Post
Your approach will not work. The problem here is that the angle that you have to use will depend on the chart type select and on the instrument selected. So you have to find out the appropriate angle for each instrument and timeframe. With this restriction portfolio backtesting becomes impossible, as each instrument will needs it own angle.

What you need to do is to normalize the steepness. This means you need to move away from all geometrical concepts and trigonometric functions and understand that slope is just a visual proxy for momentum. Go back to momentum or rise over run, and calculate the average momentum over a period of N bars. In a second step you need to put that average momentum in relation to volatility. Ticksize is no good proxy for volatility, but the average true range certainly is.

All you need to do is to divide the average momentum by the average true range. When momentum is high compared to intra-bar volatility, this is a steep move. When it is low compared to intra-bar volatility, it is a weak move.

All technical traders who have come up with geometrical concepts have basically failed. That includes that square of nine stuff as well as the Polarized Fractal Efficiency (what a fancy name for a piece of misapplied geometry). Just look for the average momentum (as William Blau did for his indicators) and compare to volatilitily, and you have a sound concept that you can use across all instruments and timeframes and that is fit for portfolio backtesting as well.

I think I understand your comment about volatility and momentum, now. A 'chop' indicator.

There are limits to my ambitions and that's past mine. I'll be pretty happy if I can just do a decent job of plotting the virtual angle of a linear regression channel.

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  #42 (permalink)
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DavidBodhi View Post
I think I understand your comment about volatility and momentum, now. A 'chop' indicator.

There are limits to my ambitions and that's past mine. I'll be pretty happy if I can just do a decent job of plotting the virtual angle of a linear regression channel.

Dividing an averaged momentum by the average true range is mathematically easier than calculating an angle.

In case that the average true range holds the value zero, you would need to set the value to zero directly to avoid division by zero.

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  #43 (permalink)
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Fat Tails View Post
Dividing an averaged momentum by the average true range is mathematically easier than calculating an angle.

In case that the average true range holds the value zero, you would need to set the value to zero directly to avoid division by zero.

Hasn't this already been done?

I don't remember where, but seems as if I have seen this logic in an indicator.

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  #44 (permalink)
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  #45 (permalink)
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I put together a quick indicator (literally 1 line of code) I named "Relative Momentum" for a lack of a better term off the top of my head, but it simply plots Momentum / ATR.

I added a rough "chop zone" (+-2) around the zero line. Above the chop zone indicates trending up, and below trending down.

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  #46 (permalink)
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Fat Tails View Post
Dividing an averaged momentum by the average true range is mathematically easier than calculating an angle.

LOL

In that, sir, you are utterly correct.

I'll make a plot of that and see what it tells me.

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