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indicators for how much whipsaw a security features?

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indicators for how much whipsaw a security features?

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  #1 (permalink)
quintana roo, méxico
Posts: 79 since Mar 2013
Thanks: 222 given, 38 received


understanding whipsaw as:

A whipsaw, as it pertains to stocks, occurs when the price of a stock moves in one direction, only to quickly reverse in the opposite direction. If you look at the price mapped out on a chart, it can look like the jagged teeth of a whipsaw. Price whipsaws can be frustrating for traders who buy in anticipation of higher prices only to lose money as the price quickly reverses lower.

from eHow-com

i wonder if there exist indicators that could capture how much whipsaw a security features?

this because as a security's price movements are smoother and more defined, it could be possible to profit more consistently.

- i think that calculating the average true range of a security's 1 or 2 minute bars over a 3 or 6 month period and dividing it by the daily atr of the same period could be an approximation. tried that on tradestation but calculations take forever and haven't managed to create a composite indicator that uses two time frames at once.

- or failing that, an average of the candlesticks' wicks to bodies ratio for a 3 - 6 month period could work too. summing the distances of the upper and lower wicks and dividing that sum over the distance of the body for the 1 or 2 minute bars of a security over the 3 to 6 month period could be another approximation. don't know if any similar indicator exists, but it maybe wouldn't be that hard to program.

- i read that the beta of the security to the s&p 500 could be another measure. i'm still researching how to display that in tradestation, but this seems to me like the bluntest approach.

any thoughts or suggestions welcome. thanks.

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  #3 (permalink)
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Do a search for chop. It's been discussed many times.


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  #4 (permalink)
quintana roo, méxico
Posts: 79 since Mar 2013
Thanks: 222 given, 38 received

thanks. i am checking out and enjoying the threads on choppy / sideways securities.

maybe whipsaw is not so good as a term. i hope this illustrations can help explain what i mean. two securities, nflx's price is all over the place be it moving or just standing, while xlk is one of the most parsimonious instruments i have seen: trends somewhere with definition and tightness, maybe then reverses back to where it started, but always in a very harmonic way. i'd like to measure for that tightness to be able to search for securities that display it.

nflx 2013-03-07

xlk 2013-03-07

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