STANDARDIZING A SCALE FOR AN INDICATOR TO WORK ON ANY CHART

January 23rd, 2019, 06:53 PM

I have been testing out some momentum indicators that use other indicators as the input rather than price (see the aqua colored bar histogram below), and I was wondering if there is a way to achieve the same scale or equalize it regardless of the symbol used? In other words, a scale from 1-100 or 0-1 . Not sure the actual scale range matters much, but I would like the SAME scale to work from symbol to symbol without having to customize the thresholds I'm using as filters each time I apply the indicator to a new symbol. As you can see below, the relevant reading on each scale are quite different as far as decimal places are concerned; so if a threshold of .2 and -.2 work as a filter on the NQ, they will not work on the CL or work differently as a filter; I have to customize the threshold levels for every market. Not sure if this can be done or not, but hoping someone can point me in the right direction.

Cheers
Bullywig

January 24th, 2019, 12:40 AM

My typical way of normalizing an indicator adjusting using ATR.

For example, I make use of MACD and wanted to be able to set alerts based on MACD levels (MA difference line). Since MACD is just the difference in two MAs, if, for example, the slow MA is 100 now, and the fast MA is 105, that would give a value of 5. It would be simple to divide by price. That actually exists and it's called PPO. I played around on barchart.com with PPO and found the levels wouldn't translate very well between different securities because differences in volatility.

Finally, I hit upon adjusting the MACD value by ATR (I typically use a 50-period ATR to make it much smoother. When I did that, I found that a value of 2 (or -2) is an "extreme" value for ATR-adjusted MACD and is where I set alerts.

I published the ATR-MACD to TradingView. I have ideas to use ATR to adjust other indicators but havene't done others yet.

February 21st, 2019, 11:32 AM

You could use the automatic gain control as explained by John Ehlers. You simply divide your signal by the abs of its peak value so your scale will be from -1 to 1. In order to regulate the peak value you multiply it with a damping factor close to 1 each period to make sure it recovers from extreme values. Ehlers proposes using 0.991.

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STANDARDIZING A SCALE FOR AN INDICATOR TO WORK ON ANY CHART

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STANDARDIZING A SCALE FOR AN INDICATOR TO WORK ON ANY CHART