Julius de Kempenaer (JdK) Relative Rotation Graphs (RRG) aka JdK RS Ratio - futures io
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Julius de Kempenaer (JdK) Relative Rotation Graphs (RRG) aka JdK RS Ratio


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Julius de Kempenaer (JdK) Relative Rotation Graphs (RRG) aka JdK RS Ratio

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  #21 (permalink)
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srgtroy View Post
How about a webinar on Chaos Theory? The only thing some of us know about it is what we learned from Jeff Goldblum

The only things I can remember are using it once and how to spell it.

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  #22 (permalink)
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tturner86 View Post

Maybe @Big Mike can get Jeff Goldblum to do an (expanded) webinar on it

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chanep View Post
If I were to use these 2 variables, I would just sort a portfolio of stocks or ETFs based on one and then maybe the other, and then buy the top N and short the bottom N. If this gives very negative backtest results, then I would reverse the trade and short the topN and buy the bottom N.

I would rebalance daily, but I may also impose a L day holding period. If I do impose L-day holding period, then I will launch a new portfolio every day, so ultimately I will have L portfolios, with capital allocated equally.

Ernie

Ernie, thanks - I really liked this part of your webinar, where you described that approach in more detail.

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  #25 (permalink)
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pretty interesting work Mike , and impressive that you are doing a custom platform as well

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  #26 (permalink)
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IlyaKipnis View Post
If anyone has the way to actually compute the two axes, I can have a starting point.

Edit: if nobody has access to the specific formulas, an agreed-upon computation would be nice.


Big Mike View Post
Please let us know how you interpret the formulas. My goal is not to create an identical chart to his proprietary formula, but simply to use the concept.

Mike


ericbrown View Post
Will do. I tend to do the same as you. The visualization is what is most interesting to me.

Has anyone tried to recreate or develop formulas to create similar RRG plots?

I am currently trying to implement via Matlab. I read the papers and started with simply comparing $COMPQ vs $SPX as shown at Stockcharts.



First I calculate the raw RS using $COMPQ / $SPX, and then calc the 10 & 30 SMA's of the raw RS.

Next I subtract the 10 from the 30 to get the MACD and then do this to normalize and create a RS-Ratio centered around 100:

RS-Ratio = (100/1+MACD)

For the past 11 weeks, my ratio has been steadily decreasing (vs stockcharts decrease -> increase -> decrease)



I think the error lies in the normalization but I am not sure how? Anyone make any headway with this indicator?

Obviously I cannot work on the y-axis (momentum) until I get the RS-Ratio correct.

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  #28 (permalink)
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Neo1 View Post
I've been playing around with some Relative Rotation charts today and thought this might be on interest.

@tigertrader has posted RRG's before in this thread, which are the work of Julius de Kempenaer. RRG's basically compute relative strength in any given universe. The graphs are split into 4 quadrants- Improving/Leading,Weakening/lagging, and often rotate around in a clockwise motion. If anyone wants to talk about them more there's already a thread for that-

Using the inverse ratio to what Mike posted( accept using the ETF's) eg SPLV/SPHB, I've created an RRG based on the ratio in relation to the SPX. This looks like a good way to visual how rotation happens, presumably in/out of high beta stocks. So based on the premise of this discussion you could assume that when SPX is improving/ leading then money is flowing out of low volatility stocks/ into high beta stocks, and when SPX is weakening/ lagging, then money is flowing out of high beta stocks/ into low vol stocks. At the moment you can see that SPX is leading, however momentum is decreasing indicating there could be a rotation into the weakening quadrant...

With the chart on the right I've assigned each quadrant to a bar color, eg Improving is white, leading is blue, weakening is grey, and lagging is red.


@Neo1 Did you write the script yourself to create the RRG chart or are you using a pre-programmed application?

I have written a script to create RRG charts using Julius de Kempenaer methodology but in the end, Julius ranks the symbols by a factor (1-99.) I have not been able to determine what factor Julius uses to rank symbols by. If calculated on your own, what factor do you use?

Here is an example from Jan 2015 from stockcharts:



And here is my code output when I brute force the factor until the plots matched:



I now use my own proprietary factor to rank stocks according to my selection methodology but would be curious to learn how others such as yourself do it.

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  #29 (permalink)
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ericbrown View Post
Will do. I tend to do the same as you. The visualization is what is most interesting to me.

@ericbrown,
I have searched the net for something like this coded in Python. Have you done any progress?

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GoldenRatio View Post
@Neo1 Did you write the script yourself to create the RRG chart or are you using a pre-programmed application?

I have written a script to create RRG charts using Julius de Kempenaer methodology but in the end, Julius ranks the symbols by a factor (1-99.) I have not been able to determine what factor Julius uses to rank symbols by. If calculated on your own, what factor do you use?

Here is an example from Jan 2015 from stockcharts:



And here is my code output when I brute force the factor until the plots matched:



I now use my own proprietary factor to rank stocks according to my selection methodology but would be curious to learn how others such as yourself do it.

Hi @GoldenRatio,
What language did you code this in? Ok to share the formula? I plan to code it in Python.

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