Given all the flak that VantagePoint has received in this and other forums, I thought it might be useful to provide some statistics. These can be easily calculated in a spreadsheet (you can download prices plus indicators to Excel from VP).
Since turning points, where trend changes direction, are often the most profitable place to enter trades, I calculated various statistics, using only 3 VP indicators - neural index (1 or 0), shot term difference trend (ie. whether predicted short term difference is up or down), and strength trend (whether predicted strength is up or down). The last two indicators are the 'quickest' (ie. most sensitive) ones that VP has to offer, while neural index is very useful for calculations of this sort, since it is either 1 or 0.
The calculations for EURUSD are given, though I ran them through all pairs in VP (twenty) and couldn't see any qualitative differences. However, I haven't tested this in any rigorous way. A year's worth of data was used in all cases.
The questions are as follows:
(1) If both predicted strength and STDiff trends are pointing in the same direction, and neural index is predicting the opposite (eg. both trends pointing up and neural index at 0, or vice versa), how long does it take for neural index to change sign?
ANSWER: If both trends are pointing up and neural index is 0, then it will change sign to 1 within 1 day 80% of the time, within 2 days 10% of the time, and some time after that another 10% of the time. For the reverse scenario, these figures were 60%, 40% and 0%.
A change in sign in the neural index almost always follows a day when the candle changes colour.
(2) Is the size of the reversal correlated to the amount of time the neural index has been consistently either 1 or 0?
ANSWER: If the neural index had been either 1 or 0 for 2 consecutive days, and there was then a reversal, in price not in the neural index, the average pips between open and close for that day was 107. For 3 consecutive days this was 102, for 4 consecutive days 118, and for more than 4 days, 116.
So there is a slight incease in the number of pips, but nothing dramatic.
(3) If the STDiff and strength trends AND the neural index are all pointing in the same direction 1 day after the neural index has changed sign, will the candle at the end of the next day be pointing in the same direction also? ie. If both trends are down and the neural index is 0 (having just changed from 1) will the next day close be lower than the next day open, and vice versa?
ANSWER: For all indicators pointing up the next day close was above the open 80% of the time, for all indicators pointing down, the next day close was below the open 100% of the time.
(4) Is (3) correlated with the amount of time the neural index was consistently pointing in the opposite direction before it changed?
ANSWER: There doesn't seem to be any correlation. The answer was much the same irrespective of how long the neural index had previously been either up or down.
I got very similar results with other USD pairs.
I think this shows that VP indicators can be fairly useful, both for predicting when changes in short term trend are likely to occur, and in showing what the actual price is likely to do in such cases.
Since turning points, where trend changes direction, are often the most profitable place to enter trades, I calculated various statistics, using only 3 VP indicators - neural index (1 or 0), shot term difference trend (ie. whether predicted short term difference is up or down), and strength trend (whether predicted strength is up or down). The last two indicators are the 'quickest' (ie. most sensitive) ones that VP has to offer, while neural index is very useful for calculations of this sort, since it is either 1 or 0.
The calculations for EURUSD are given, though I ran them through all pairs in VP (twenty) and couldn't see any qualitative differences. However, I haven't tested this in any rigorous way. A year's worth of data was used in all cases.
The questions are as follows:
(1) If both predicted strength and STDiff trends are pointing in the same direction, and neural index is predicting the opposite (eg. both trends pointing up and neural index at 0, or vice versa), how long does it take for neural index to change sign?
ANSWER: If both trends are pointing up and neural index is 0, then it will change sign to 1 within 1 day 80% of the time, within 2 days 10% of the time, and some time after that another 10% of the time. For the reverse scenario, these figures were 60%, 40% and 0%.
A change in sign in the neural index almost always follows a day when the candle changes colour.
(2) Is the size of the reversal correlated to the amount of time the neural index has been consistently either 1 or 0?
ANSWER: If the neural index had been either 1 or 0 for 2 consecutive days, and there was then a reversal, in price not in the neural index, the average pips between open and close for that day was 107. For 3 consecutive days this was 102, for 4 consecutive days 118, and for more than 4 days, 116.
So there is a slight incease in the number of pips, but nothing dramatic.
(3) If the STDiff and strength trends AND the neural index are all pointing in the same direction 1 day after the neural index has changed sign, will the candle at the end of the next day be pointing in the same direction also? ie. If both trends are down and the neural index is 0 (having just changed from 1) will the next day close be lower than the next day open, and vice versa?
ANSWER: For all indicators pointing up the next day close was above the open 80% of the time, for all indicators pointing down, the next day close was below the open 100% of the time.
(4) Is (3) correlated with the amount of time the neural index was consistently pointing in the opposite direction before it changed?
ANSWER: There doesn't seem to be any correlation. The answer was much the same irrespective of how long the neural index had previously been either up or down.
I got very similar results with other USD pairs.
I think this shows that VP indicators can be fairly useful, both for predicting when changes in short term trend are likely to occur, and in showing what the actual price is likely to do in such cases.
