T2W Bot

Staff member
1,459 60
The Proof is in the Trading
In my recent TASC article, ?The Hunt for Superior Signals ? Two Moving Function Hybrids? (September 2005), I recommended that the Moving Slope Rate of Change (?MSROC?) be a part of every trader and researcher?s toolbox.   A quick look at this indicator demonstrates its value:

As you can see, the moving slope rate of change is remarkably smooth.  Instead of using just a change in price to calculate slope (as with rate of change or ?ROC?), we use the slope of a least-squares line to calculate MSROC.  [Instructions for MSROC calculation are at the end of the article.]  Least-squares lines are notoriously smooth.  This smoothness is a major asset, as it minimizes the need for further qualification or subjective input, giving fewer ?false signals?.  For example, from 1993 to early 2005, you would have observed the...
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Orion

Active member
103 0
If, by "MSROC", you mean the standard "Linear Regression Slope" (and it appears you do), I would agree that it is a useful indicator and superior to the run-of-the-mill moving averages. I've been using it within Metastock for years and incorporate it within several of my EOD trading systems for FX and equity indices.
 

A Dashing Blade

Experienced member
1,373 170
Orion said:
If, by "MSROC", you mean the standard "Linear Regression Slope" (and it appears you do), I would agree that it is a useful indicator and superior to the run-of-the-mill moving averages. I've been using it within Metastock for years and incorporate it within several of my EOD trading systems for FX and equity indices.
Tbh, I'm not sure he does.

"Most stand-alone software products (including Excel®) have the ability to fit a linear regression line through say the last 25 closing prices. Calculate the vertical (price) difference between the beginning and ending values of that line, and divide it by the horizontal change (the number of days, i.e. 25). That’s the slope of the line for that 25-day period. Divide that slope by the beginning value of the line, and you will make your indicator price-independent. Perform all of the above over successive 25-day periods, and you will make it moving. The price independency makes the MSROC for one market comparable to that of another – which gives you a smooth and timely ranking tool. "

To me, this reads as simply calculate the change in price which is just the old fashioned Momentum Indicator isn't it?

There's no mention of using linear regression to produce a "best fit" curve & start charting the slope of each sequential line which is what I think your using Orion.
 

ChowClown

Senior member
2,732 56
As an Excel novice, what function name would you use to "fit a linear regression line through say the last 25 closing prices"? The rest i can just about follow...;)
 

Orion

Active member
103 0
A Dashing Blade said:
Tbh, I'm not sure he does.
To me, this reads as simply calculate the change in price which is just the old fashioned Momentum Indicator isn't it?

There's no mention of using linear regression to produce a "best fit" curve & start charting the slope of each sequential line which is what I think your using Orion.

I think there is! He says:

"Most stand-alone software products (including Excel®) have the ability to FIT A LINEAR REGRESSION LINE through say the last 25 closing prices. Calculate the vertical (price) difference between the beginning and ending values of THAT LINE (i.e. not the closing prices but the LR values), and divide it by the ........."

I don't happen to use a 25 day period but if I plot a 25d Linear Regression SLOPE (a standard Metastock indicator) of the daily Dow, I get an identical curve to our erstwhile author. If I ever manage to find out how to upload charts onto t2w I could demonstrate, but for the moment take my word for it.

Anyhow, the point I was making was that it is indeed a useful indicator, whatever you care to call it, and in my view far superior to moving averages and the usual overbought/oversold oscillators and "momentum"-type indicators.
 

author_trader

Newbie
5 0
The standard slope that you speak of is the moving slope. However dividing that slope by the first value of the linear regression line will give you MSROC . If your software will not allow you to do that automatically, then divide the slope by the ((N-period moving trend) back N). The moving slope is great, and as is noted, is a significant improvement from standard moving average based momentum indicators. However, MSROC has 2 distinct advantages over moving slope. The first is that MSROC is usually smoother than the moving slope, albeit subtly so. The second is that MSROC is price-independent, which makes it perfect for asset (sector, etc) ranking.
 

author_trader

Newbie
5 0
The first is that MSROC is usually smoother than the moving slope, albeit subtly so. The second is that MSROC is price-independent, which makes it perfect for asset (sector, etc) ranking.
 

ChowClown

Senior member
2,732 56
Thanks ADB, i see SLOPE in Excel needs x & y vars. Say i wanted to plot slope values on DOW closing prices, i'm assuming these would be the x array. What data do i need for y?


A Dashing Blade said:
I stand corrected :eek:

ChowClown, it's the =Slope() function.
 

jmreeve

Well-known member
432 13
I think this is one of the better knowledge lab articles.
It includes some hard stats on performance and all the information needed to verify the numbers.

Would like to see more articles like this and less articles full of useless psychobabble.
 

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