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Need help/input on simple trend calc


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Need help/input on simple trend calc

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  #1 (permalink)
Austin, TX
 
Experience: Advanced
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I'd like to develop a "simple" trendline calculation which yields a binary output (upward trend or downward trend).

Strength or slope would be nice, but isn't paramount. I'm more concerned about making sure that I get the localized trend correct.

The calculation would only need to be for the previous few bars (say 2-5).

I've thought about averaging the highs/lows along with the opens/closes and interpolating between bars....

i.e.

bar[1]: Open of 100.00, Close of 200.00, High of 250.00 and low of 50.00.

The "center mass" of that bar would be (((H+L)/2)+((O+C)/2))/2 or 150.00

Obviously if the "center" mass of the previous bar was lower, it would be an upward trend.

The other possibilities are even simpler, by getting a delta from the 2 bars, highs, lows, opens, closes for a 4 number vote (weighted).

any help, recommendations or input would be greatly appreciated. Especially if I don't have to reinvent the wheel.

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Market Wizard
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RM99 View Post
I'd like to develop a "simple" trendline calculation which yields a binary output (upward trend or downward trend).

Strength or slope would be nice, but isn't paramount. I'm more concerned about making sure that I get the localized trend correct.

The calculation would only need to be for the previous few bars (say 2-5).

I've thought about averaging the highs/lows along with the opens/closes and interpolating between bars....

i.e.

bar[1]: Open of 100.00, Close of 200.00, High of 250.00 and low of 50.00.

The "center mass" of that bar would be (((H+L)/2)+((O+C)/2))/2 or 150.00

Obviously if the "center" mass of the previous bar was lower, it would be an upward trend.

The other possibilities are even simpler, by getting a delta from the 2 bars, highs, lows, opens, closes for a 4 number vote (weighted).

any help, recommendations or input would be greatly appreciated. Especially if I don't have to reinvent the wheel.


I do not think that a trend can be determined from the last 5 bars, but 30 or 50 bars would be more appropriate. But if you insist on taking 5 bars only you have numerous options.

-> Use a 5-period Fast Stochastic or 5 period RSI and check whether they are above or below 50, you can even define a neutral range.
-> Check whether the close is above or below the 5-period Median or 5-period SMA.
-> Determine the slope of a 5-period Linear Regression Indicator
-> Calculate the 5-period Directional Movement

and so on. There are no limitations how to define the trend. Again I use a much longer term period to define a trend and then try to identify retracements within that longer period, which are tradeable.

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June 16, 2011


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