Is there an indicator that “normalizes” pullback signals against varying trend strengths?

[ddcet]

Does anyone know of a good indicator that "normalizes" pullback signals based on the context of the strength of the trend they occur in? I've noticed that trend strength and pullback depth are often inversely proportional to one another.

There must be a way to measure this relationship and predict what a reasonable pullback zone can be based on the strength, but I've never seen an indicator that takes this into account (I'm still new and still learning about the indicator landscape).

Most indicators I have seen are "ignorant" of the trend...

For example, a 20 period MA might be a great touchpoint for some pullbacks (ie if the trend strength is "just right") - but the price won't even glance it for others; for others still the price will blow right through it and touch the 50 MA!

Again there must be some way to balance these two forces and produce a "smart" pullback signal generator? In fact I assume one already exists and in my newbie-ness I just haven't found it yet...

One should by this method be able to anticipate what kind of depth to watch for (in theory).

 

[trdes]

Does anyone know of a good indicator that "normalizes" pullback signals based on the context of the strength of the trend they occur in? I've noticed that trend strength and pullback depth are often inversely proportional to one another.

There must be a way to measure this relationship and predict what a reasonable pullback zone can be based on the strength, but I've never seen an indicator that takes this into account (I'm still new and still learning about the indicator landscape).

Most indicators I have seen are "ignorant" of the trend...

For example, a 20 period MA might be a great touchpoint for some pullbacks (ie if the trend strength is "just right") - but the price won't even glance it for others; for others still the price will blow right through it and touch the 50 MA!

Again there must be some way to balance these two forces and produce a "smart" pullback signal generator? In fact I assume one already exists and in my newbie-ness I just haven't found it yet...

One should by this method be able to anticipate what kind of depth to watch for (in theory).

Wouldn't just a secondary indicator that judges momentum or strength work? Than only take the touch of the MA on a pull back if the secondary indicator is above "X" in strength (whatever "X" would be that would take a lot of backtesting).

 

[MarkBrown]

there are all sorts of ways to do this as well as track sessions etc in a global market. most people ignore what your asking but it's in most everything i use. knowing trending vs chopping is essential to determining what trading method to use in the current state.

otherwise you will be giving back profits when a market transitions from trend to chop, often call ed regime change. there are many tracking indicators for just that but you will have to custom program to integrate it into one "what i call" master indicator.

 

[danielc1]

I use cumulative delta for that purpose. The relationship between price and delta in the pullback at an ma tells if it will hold or go through.

 

[Metamega]

I use keltner bands on a 20 day EMA 2 ATR for bands. Helps to measure pullback depth, over extension, exhaustion , etc.

Also picked up 3/10/16 MACD from Adam Grimes. It’s on a SMA to smooth out a bit. Basically looking for a divergence on the fast line between swings to help notice trends slowing down.

 

[ddcet]

Wouldn't just a secondary indicator that judges momentum or strength work? Than only take the touch of the MA on a pull back if the secondary indicator is above "X" in strength (whatever "X" would be that would take a lot of backtesting).

Hi Trdes, hopefully I was explaining myself properly in my question.

Are you proposing "mapping" the output of an indicator suited to measure trend strength indicator to the output of an indicator suited to measure short term price variations? Eg a range of "20-30" on indicator A would correlate to a pullback size of "X" as reflected on indicator B?

If I have you right, could you recommend two such indicators that might pair well together?

(Note: I have had difficulty finding any trend strength indicator that I have figured out how to make useful yet... so this is probably an important starting point)

Thanks

 

[longandshort]

Standard deviation lol. Literally.

 

[ddcet]

I use cumulative delta for that purpose. The relationship between price and delta in the pullback at an ma tells if it will hold or go through.

Thanks Daniel! Could you elaborate on that relationship a bit, and what you like to see happen to confirm the price isn't going to obliterate an MA (eg)? I'm not familiar with this indicator and just looking at it for the first time here.

 

[easymon1]

I use keltner bands on a 20 day EMA 2 ATR for bands. Helps to measure pullback depth, over extension, exhaustion , etc.

Also picked up 3/10/16 MACD from Adam Grimes. It’s on a SMA to smooth out a bit. Basically looking for a divergence on the fast line between swings to help notice trends slowing down.

...don't suppose you'd post an example chart or two?

 

[ddcet]

On a related note, I have just been noticing here that RSI often offers up a "support" or "resistance" level around the same level for 2 or more pullbacks... (screen capture attached).

RSI is a strength indicator, but a bit jumpy to be used to gauge trend strength on its own. Maybe there is something else that could be used as well?