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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

  #61 (permalink)
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DavidL View Post
Thanks for the heads up on the webinar Julius. Interesting stuff.

I can see where the manual charts would be very beneficial for a rotation strategy changing out every week or so. I'm sure the API would make even finer rotations possible.

Your presentation certainly gave me lots of ideas.

Are the graphs basically the same across the various services? Or do the premium services have more features? Just curious.

Thanks David, the basic charts have the same functionality in all services. In BB and Market Analyst we offer some additional tools. For BB the RRG-Lines and 2 color bar studies derived off RRG. Market Analyst professional has the most extensive tool-set for RRG with lots of reall nifty things. One I like for example is the ability to use a Bubble chart for RRG and use the bubble size for another metric. For example the wight of a sector within the broader index. Or the wight of a position within a portfolio etc etc.

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  #62 (permalink)
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Big Mike View Post
I don't have spare time for the implementation right now, but will reach out at some point. This would be for my own private use only for my own trading with my own funds.

Mike

Whenever you are ready @Mike

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  #63 (permalink)
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@Inletcap

Thought i'd best respond here.


Inletcap View Post
I don't want to derail this thread as the Zone Concept and Implied Momentum are premised on a longer term approach but I'll give a little to go on. Jim Yates used IV "as an input" to create a model which placed securities into 6 Zones. Thinking of a bell curve, Zones 1 and 6 are 2+ Standard Devs from a normal distribution. This does notmean that having a high IV puts you in zone 1. The model factors in price performance as well and does an amazing job of placing securities properly upon the curve- what I mean by this is that severely underperforming(undervalued) securities with high IVs end up in zone 1 whereas those that are outperforming (overvalued) with high IVs end up in Zone 6.

Since the sector ETFs now have a fairly liquid options market and decent pricing, IVs can be easily calculated and the sectors placed in their respective zones. Mr. Yates opined that specific options strategies fit securities based on their respective zone positioning as seen below:

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The Implied Momentum calculation was used to show a shift in a securities "bias". From my understanding, Implied Momentum will lead a securities price movement as investors feel the move has gone too far and do not see the potential for further decline/advance. An example would be to buy calls on Zone 1 stocks who's IM changed from Negative to positive. Below is a snapshot of several sectors present Zone, IV and IM scores so you can see that a high IV doesn't necessarily mean good or bad.

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The whole concept is very similar to JDKs work but adds a different elements. I use this tool primarily for position management decision making and would like the visualization of RRG applied.

It all sounds very interesting, I used to look at expected moves based on IV before i started using STDs of VWAP. What I was getting at is that in order to compute anything to do with IV, you'll need all the options pricing data( most platforms aren't going to offer this), so you can calculate some sort of weighted average volatility of both the put and call options for each underline you're tracking. Basing it on the IVX computation might be a good idea.

I had a quick read of Jim Yates old STOCKS & COMMODITIES interview and it sounds like he's using IV to calculate the expected move over N period, and then ranking it as "zones 1-6" based on +/- STDs of how far away price is currently tracking from it's expected move.

ftp://80.240.216.180/Transmission/%D0%A4%D0%B0%D0%B9%D0%BB%D1%8B/S&C%20on%20DVD%2011.26/VOLUMES/V11/C06/Intervi.pdf

Here's an example of his implied risk formula-

ftp://80.240.216.180/Transmission/%D0%A4%D0%B0%D0%B9%D0%BB%D1%8B/S&C%20on%20DVD%2011.26/VOLUMES/V11/C12/SIDEIMP.pdf

One way to implement this into a RRG would be to use a script/ bubble style function similar to what is offered in MA7, however it would need to be in a platform that has all the options pricing data(like TOS). Then you could take the implied risk computation( or something similar) and implement your own zone style ranking ( eg 1-6) so each zone was displayed on a RRG plot with a different sized bubble(1-6). This way you wouldn't need to touch the RRG computation , however each security would be plotted with a bubble size based on it's zone ranking, so you could easily visualize if IV was supporting relative rotation.

"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
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  #64 (permalink)
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Neo1 View Post
@Inletcap

Thought i'd best respond here.



It all sounds very interesting, I used to look at expected moves based on IV before i started using STDs of VWAP. What I was getting at is that in order to compute anything to do with IV, you'll need all the options pricing data( most platforms aren't going to offer this), so you can calculate some sort of weighted average volatility of both the put and call options for each underline you're tracking. Basing it on the IVX computation might be a good idea.

I had a quick read of Jim Yates old STOCKS & COMMODITIES interview and it sounds like he's using IV to calculate the expected move over N period, and then ranking it as "zones 1-6" based on +/- STDs of how far away price is currently tracking from it's expected move.

ftp://80.240.216.180/Transmission/%D0%A4%D0%B0%D0%B9%D0%BB%D1%8B/S&C%20on%20DVD%2011.26/VOLUMES/V11/C06/Intervi.pdf

Here's an example of his implied risk formula-

ftp://80.240.216.180/Transmission/%D0%A4%D0%B0%D0%B9%D0%BB%D1%8B/S&C%20on%20DVD%2011.26/VOLUMES/V11/C12/SIDEIMP.pdf

One way to implement this into a RRG would be to use a script/ bubble style function similar to what is offered in MA7, however it would need to be in a platform that has all the options pricing data(like TOS). Then you could take the implied risk computation( or something similar) and implement your own zone style ranking ( eg 1-6) so each zone was displayed on a RRG plot with a different sized bubble(1-6). This way you wouldn't need to touch the RRG computation , however each security would be plotted with a bubble size based on it's zone ranking, so you could easily visualize if IV was supporting relative rotation.

Thanks for your input/interest in this subject... Tradestation calculates a weighted Implied Volatility for optionable stocks/ETFs at the end of every day which is absolutely fine for my needs. The calculations are quite simple if one has this data as all Jim Yates was doing was basically treating the IV as a "Bollinger Band" against a 90 DMA. I plot this as an indicator similar to %B which is simply- (Close- Lower Band) / (Upper Band - Lower Band) where the bands are a 90 DMA +/-(( Daily IV * Close) / 252 ) * 90. This creates the "Oscillator" where values >1 = Zone6, .75-1 = Zone5, 50-75 = Zone4, etc. Implied momentum is either positive or negative(the value is insignificant and is just whether the Zone Score is <> a 10 DMA of itself.

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For RRG purposes, the zones and raw momentum value could be used. I am really just wanting to have the visual aspect of RRG with the tails as I would like to compare with the Relative Strength version to explain to clients why we implemented certain strategies (trimmed position, Increased Positions, Covered Calls, Married Puts, etc).

I could go on about the value of this very simple analysis technique forever as I have found excellent long term results using this as a "relative field position" guide (Not a trading signal although one could argue it works) for several years now. I find it is a better indicator of market expectations than Bollinger Bands as the input is not derived from price itself. Only downfall is it reliance upon a moving average which I could go on and on about that too but its a great tool.

What platform are you on?

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  #65 (permalink)
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Neo1 View Post
@Inletcap

Thought i'd best respond here.



It all sounds very interesting, I used to look at expected moves based on IV before i started using STDs of VWAP. What I was getting at is that in order to compute anything to do with IV, you'll need all the options pricing data( most platforms aren't going to offer this), so you can calculate some sort of weighted average volatility of both the put and call options for each underline you're tracking. Basing it on the IVX computation might be a good idea.

I had a quick read of Jim Yates old STOCKS & COMMODITIES interview and it sounds like he's using IV to calculate the expected move over N period, and then ranking it as "zones 1-6" based on +/- STDs of how far away price is currently tracking from it's expected move.

ftp://80.240.216.180/Transmission/%D0%A4%D0%B0%D0%B9%D0%BB%D1%8B/S&C%20on%20DVD%2011.26/VOLUMES/V11/C06/Intervi.pdf

Here's an example of his implied risk formula-

ftp://80.240.216.180/Transmission/%D0%A4%D0%B0%D0%B9%D0%BB%D1%8B/S&C%20on%20DVD%2011.26/VOLUMES/V11/C12/SIDEIMP.pdf

One way to implement this into a RRG would be to use a script/ bubble style function similar to what is offered in MA7, however it would need to be in a platform that has all the options pricing data(like TOS). Then you could take the implied risk computation( or something similar) and implement your own zone style ranking ( eg 1-6) so each zone was displayed on a RRG plot with a different sized bubble(1-6). This way you wouldn't need to touch the RRG computation , however each security would be plotted with a bubble size based on it's zone ranking, so you could easily visualize if IV was supporting relative rotation.

Interesting thoughts/views. As a matter of fact, since the day RRGs were "born" thoughts like these are crossing my mind on a (probably) weekly basis. As you point out correctly the availability of data often is a limitation. I have done some work, but not extensively yet, using volatility (regular so not based on options IV) to equalize the rotation of high Beta and low Beta sectors or stocks for example. Using Bullish% as input instead of price. Running RRGs using double benchmarks and/or multi time-frames. etc. etc. etc.
It is sort of "pandorra's box" every time you open it, something new pops out

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  #66 (permalink)
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GoldenRatio View Post
@donedge

Unfortunately I cannot simply post the Matlab code due to reason I do not care to get into here in forum. However, I can show you the way. Most of the information on how to build can be found in Paul Ciana's-New Frontiers in Technical Analysis and Julius own website and public papers:

Calculate both a 10 and 30 week SMA
Take MACD of above
Create RS Ratio using MACD and Julius proprietary factor (1-99)
Calculate 9 week SMA of RS Ratio
Create RS Momentum of above.
Plot RS Ratio vs. RS Momentum

Good luck and please keep your word by posting Python code. Again, the hiccup if trying to match StockCharts or Bloomberg is that you do know know how Julius ranks the securities from 1-99. I use my own proprietary program to create rankings.

Hi Golden Ratio,

Do you have a link to JDK's public papers? My googling skills r ok, but I cannot seem to find it.

Thank you,
eb

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  #67 (permalink)
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econbizer View Post
Hi Golden Ratio,

Do you have a link to JDK's public papers? My googling skills r ok, but I cannot seem to find it.

Thank you,
eb

Sorry, I do not have a link. I do recall finding most of the information via Google searches, etc.

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  #68 (permalink)
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GoldenRatio View Post
Sorry, I do not have a link. I do recall finding most of the information via Google searches, etc.

That's alright, thanks mate, I appreciate your reply!

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  #69 (permalink)
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Hi all,

Let me re-iterate my previous reply in this thread:


Quoting 
I stumbled upon this thread and noticed people are trying to reverse engineer the algorithms to re-create Relative Rotation Graphs which I first created back in 2004 and got embedded in Bloomberg professional terminals in 2011. Let me first say that it's flattering to see people trying to copy something you have created and I cannot stop anybody playing around in their own backyard.

However, having said that, from a business perspective I need to point out to you that the visualization methodology of Relative Rotation Graphs (RRGs) is protected by copyright law and so is the Intellectual Property of the algorithms for the indicators they use. Finally, RRG/Relative Rotation Graphs are also an internationally registered Trademark.

So I would like to ask all of you to respect the ownership of these materials as well as the rights of RRG Research' current (Bloomberg, Thomson Reuters, Market Analyst, StockCharts.com and the Hong Kong Economic Journal) and future business partners, there are more in the pipeline.

If you happen to find anything or copy (some of) the ingredients then please keep it to yourself and refrain from sharing them in public.

Needless to say that any commercial use or exploitation is strictly limited to licensees of RRG Research. In case you are interested in anything like that please do get in touch with me and let me know what you would like to do. We are keen to get more exposure for RRGs, we won't bite and we are very reasonable. Our licensees get access to our API which will take care of the back-end number crunching and we have a script available to render the graphs (including animation of the rotation and a few other controls) on a website or a web-based platform.

In case you would like to get in touch with me just drop me a message here or on my regular email, I did not shut myself off from the rest of the world (on the contrary, the door is open) and I am happy to talk to people with the same interests. In the end of the day, I love the dynamics of the financial markets and a quant/technical approach to them but I also have to keep an eye on the business interests of RRG Research which I hope you will understand and respect.

And to point you to some resources so you do not have to google too much yourself

On StockCharts.com
RRG Relative Strength [ChartSchool]
Relative Rotation Graphs (RRG Charts) [ChartSchool]

Optuma.com (former Market Analyst)
https://help.optuma.com/kb/faq.php?id=636
Research Papers | Optuma
(here you will find two papers on RRG; 1. Buying outperformers is too late, 2. RRG weights paper

Trader Magazine
The new TRADERS' Magazine September 2013 - Relative Rotation Graphs - Tradesignal Online

some videos




Our own site www.relativerotationgraphs.com just got a new design and we have split the blog into two categories. One for Resources, (educational, informational) and one for Commentaries (more time sensitive content). The plan, or at least the intention. is to add more resource articles in the coming period, definitely also focussing on results and more quant ways to implement RRG data.

Furthermore, the API has been developed further and now supports requests for longer term history for research purposes. The RRG Online implementation has been improved and we are planning to launch a small RRG visualization utility that allows the rendering of RRGs using your own data. For now, we accept CSV data and can connect to IB but will be adding more data formats going forward.

If there is anything you would like to discuss with me just reach out via mail (best) a contact form on the website or any other channel where we are active (FB, LI, twitter etc.). We always try to be very responsive, interested and nice

Thanks for understanding!

Julius de Kempenaer

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