MrG's Custom Indicator - A call to arms, T2W unite!!

[MrGecko]

On a more practical note you could just forget about trend altogether and use momentum as a proxy

Can you elaborate?

 

[robster970]

Some sort of least squares method may mitigate that Tony? Thinking out loud here - my stats knowledge getting a dusting off.

It will.

 

[zupcon]

Can you elaborate?

Sure. I assume that you want a simple method of determining if there's a trend, and If a trend exists you'll then subsequently look for an entry in the direction of the trend.

I originally got the idea of using momentum as a filter from Cynthia Kase, and Ive always found that even the simplest of momentum indicators, used in a higher timeframe gives a far better indication of trend direction than indicators that are typically used to determine trend (moving averages, least squares regression,DMI, MACD etc)

 

[robster970]

As per you point here, this is something I had hoped to negotiate my way around. The angle would only change if I kept the units the 'opp' side is being measured in the same... this is why I take the average over the past XX bars - scaling up or down a timeframe, I suspect, would in turn reduce the absolute size of a price "unit", therefore avoiding the situation you describe above.

Alternatively instead of changing your unit size you can use SD as the offset in some way to your unit, then your unit remains contextual for the stock/index/whatever and accounts for price volatility as it varies over time.

This has suspected that something like this would be the case, it is encouraging to hear you found the similar results. I had considered a position size function that rose exponentially with the angle (even as crude as position size = f(sin(@)))

If you use SIN, being the Opp/Hyp you will actually penalise yourself if you use the (1-sin(x)) of this function the more aggresive your trend is. Consider Cos(x) instead. Remember sin^2(x) + cos^2(x) = 1. I have found experimentally that vol weighting works nicely in that correlation although I am still getting better results from fixed level profiut takes and trailing stop-losses. I think there is something in this whole area but I've yet to figure it out myself.

Correlation of multiple TF's is not something I had thought about... and not quite the route I want to go down just yet. Intuitively it seems that is a step away from the price action, which we have all mentioned is really where it's at.

It's relationship of timeframes for the TF's to each other that needs a truckload of backtesting, not the correlation itself I found. This I found to be really time consuming and prone to curve fitting. You could end up down a cul-de-sac here which could provide startingly good back-test results and mediocre forward testing results.

The Indicator is not intended to be used as a system in it's own right, but rather as a litmus test for the appropriacy of another system in the current market conditions (i.e. Is there a trend? If Yes, goto step 2, if not, end).

Best use of your indicator I reckon MrG.

I'm pleased my thoughts are of use. I've been on a 3 month journey building my system which I think is pretty basic but was borne as a consequence of having to visit lots of dead-ends and a growing realisation that a lot of what pops up on these boards is very, very sensible. Nice for me to be finally putting something back in.