MAs.. usefulness comes and goes

[Sergio123]

We seem to have some signal processing guys in this thread.... Take the rate of the rate of change of price which is acceleration a.k.a. gamma. An impulse spike in the rate of the rate of change indicator means that the options just got more premium injected into them.

 

[SunTrader]

.

I have struggled to formulate good rules for using ROC indicators that would allow them to be incorporated into new or existing trading systems.

I believe the classical approach was to take buy signals when the ROC line is above its center line and take sell signals when it is below. However, prices often go down for a long time while it's above or go up for a long time while it is below...

What do you think is the best way to use this type of indicator?

TD ROC that I use, as recommended by Tom Demark is ratio derived meaning Close / Close [x nbr bars ago] * 100.

Then my preference is to use a length of 60. For a long while I used 10 but even on a one minute basis I found 60 works well - smoother without missing signals. Long reversals when it below 100 and short reversals when it is above 100, also comparing current reading to prior swing high/low readings and highest/lowest reading overall on the session.

 

[panzerman]

We seem to have some signal processing guys in this thread.... Take the rate of the rate of change of price which is acceleration a.k.a. gamma. An impulse spike in the rate of the rate of change indicator means that the options just got more premium injected into them.

Which is why you should read "Whiter is Brighter." It explains why a 2 day ROC is preferred over a 1 day.

 

[SunTrader]

Which is why you should read "Whiter is Brighter." It explains why a 2 day ROC is preferred over a 1 day.

A 1 day ROC?

Isn't that just C - C[1], or C / C[1]?

 

[murray t turtle]

They are just lines on the chart... equivalent to chasing unicorns.

%%
Good points;
another big problem is most any animal has 2 or 2+ horns, not one horn
Since unicorn = also slang for huge profit start up co;
I avoid chasing IPOs or only one moving average = too average .Who wants to be average or less than average?? Not me

 

[zghorner]

I did a little testing with various MAs and personally did not see anything a trend line won't tell...maybe just me idk idc. I do see value in things like: "desired movement to capture" and study it with the goal of predicting volatility expansion(1), and direction(2); Trend Average ($) & (duration) to give you a general idea on what to expect.

If the primary instrument you play moves on average ~1.5 points per day in a micro trend like fashion...for an average duration of ~125 min...why tf are you either losing money, or barely scraping by on a few ticks a day? What generally happens before the move and why are you entering on the last 30% instead of the first thirty? Why are you normally entering AFTER vol has already expanded to probably its highest level?

These types of questions I think are worth the time to answer.

disclaimer: Up to this point i'm a loser on balance so there is a good chance i'm way off and have no clue wtf i am talking about.

 

[ph1l]

A 1 day ROC?

Isn't that just C - C[1], or C / C[1]?

The "Whiter is Brighter" article is using differences of prices, not ratios.

There is one problem introduced by taking the one-bar difference
of the input data. At the Nyquist frequency, where there
are exactly two samples per cycle, those samples are exactly
180 degrees out of phase. Therefore, taking the difference of
these samples doubles the amplitude of the noise. This, in
effect, is the noise gain of the filter. The gain in noise at the
Nyquist frequency can be easily eliminated by using a two-bar
average of the difference. Thus, the modified white spectrum
is computed as:

WhiteSpectrum = ((Close – Close[1]) +
                    (Close[1] – Close[2])) / 2;
              = (Close – Close[2]) / 2;

 

[SunTrader]

The "Whiter is Brighter" article is using differences of prices, not ratios.

Yeah but I asked what is a one ROC, whether or not subtraction or division is used?

Because in my mind a 1 day ROC is just price compared to 1 day ago. No?

And what's the use of that?

 

[murray t turtle]

Understand market cycle then decide if you want to use MA/s.

%%
THAT could work well\
or study + understand movin' averages + figure out the market cycle.
IF only all was like SEPT sells or buy tech ETFs in 4th quarter above 200dma

 

[panzerman]

%%
THAT could work well\
or study + understand movin' averages + figure out the market cycle.
IF only all was like SEPT sells or buy tech ETFs in 4th quarter above 200dma

Measuring the market dominant cycle and then using that data to adjust or tune indicators is what John Ehlers was all about for the past 20 plus years. However, if you read his last interview with S&C, he basically dismisses cycle measurement. He believes cycles are too ephemeral in price data and just too difficult to measure accurately.

Of course he states this after just retiring.