The magical 3rd derivative of price...

R

RangeTrader

I really don't care too much for most 1st derivative indicators. RSI, MACD, Stochastics, etc... MACD is actually a 1st and 2nd derivative indicator.

1st derivative indicators are very lagging generally.

2nd derivative indicators are low lag and excellent for confirmation.

3rd derivative indicators are generally price leading and very useful... Great for calculating divergences!!!

Nothing useful beyond 3rd derivative. Perhaps 4th/3rd derivative crossovers are useful. Never checked.


It was a year and a half ago when I coded my first 3rd derivative indicators. Who else here knows how to create a 3rd derivative indicator and why it's so nice? 3rd derivative indicators are so much fun... 75%+ of the time it's like knowing the future before it happens...


The ultimate is the non derivative though. Price itself as an indicator.
 
I can't tell if your preaching or asking questions?

:confused: :confused: :confused:


Quote from RangeTrader:

I really don't care too much for most 1st derivative indicators. RSI, MACD, Stochastics, etc... MACD is actually a 1st and 2nd derivative indicator.

1st derivative indicators are very lagging generally.

2nd derivative indicators are low lag and excellent for confirmation.

3rd derivative indicators are generally price leading and very useful... Great for calculating divergences!!!

Nothing useful beyond 3rd derivative. Perhaps 4th/3rd derivative crossovers are useful. Never checked.


It was a year and a half ago when I coded my first 3rd derivative indicators. Who else here knows how to create a 3rd derivative indicator and why it's so nice? 3rd derivative indicators are so much fun... 75%+ of the time it's like knowing the future before it happens...


The ultimate is the non derivative though. Price itself as an indicator.
More...
 
I'm just bored and my mind is wandering... But I'm actually not joking.

I have never actually analyzed the 4th derivative of MACD...

I coded it in on my custom MACD formula a few minutes ago and the 4th derivative is actually decent when price is oscillating in a range...


My main indicator is 1st derivative, but it's just for price pattern analysis... So I am using it like a 2nd derivative even though it's a 1st derivative.

The 4th derivative is the red/green line. Signals are when the indicator changes slope as I have pointed out with my photoshop added arrows.
 

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4th Derivative of MACD SPX Daily...

Very interesting indeed... Could time some entry quite well... Placing them in the last five minutes before close. (Not like price is going to shift enough in that time to change the signal.)

But... Honestly, once you understand the 4th derivative all you need is the 3rd derivative as you can tell what the 4th derivative is by the curve of the 3rd derivative easily.
 

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I've seen a guy in a local prop shop use 3rd derivative's to hedge MACD crossover's, didn't see his pnl but said he was pulling in $10k a week in NYSE listed names. He also said he prefers Dos Equis.
 
I've looked at f' (close[0] -close[1]) and f' of that and if I select coloration based on slope of the f'' I have f'''.. but it's not the greatest thing for trading really... and derivatives of MACD... you have a bunch of averaging meant to overcome the problems of.. well.. averaging.. then you take the derivatives of it, wow, have to get back to you on that one...

dang I've spent a lot of time looking into stuff like this, it's an addiction sort of.. I can resist this time.. I can do it.. I'll not go there... sweat is breaking out on my forehead...
 
Quote from swag:

I've seen a guy in a local prop shop use 3rd derivative's to hedge MACD crossover's, didn't see his pnl but said he was pulling in $10k a week in NYSE listed names. He also said he prefers Dos Equis.
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What does a third derivative mean?
 
Hmmm... Very interesting... Coloring the 3rd derivative based upon the slope of the 4th derivative...

I will just shelve this and remove it from my charts. I don't use indicators for trade entry/exit... But this is some interesting stuff I never knew about the MACD 4th derivative...

Stochastics 4th derivatives are completely useless so I assumed MACD ones would be too... But they are not. Interesting.


If I ever get into full automated this will be useful for odds calculations...
 

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