<font color=blue>The Need for Speed, Cont'd:
We continue with insights contributed by those around us, this one by a trader from our eGroups thread:
groups.yahoo.com
"A quick glance at the above posts leads me to believe you are trying to develop a concept for speed, correct me if I'm wrong I did not have time to look into all the posts. I can not help with the programming, but maybe able to add some input to the subject.
Van Tharp looked into a speed/velocity indicator for a demonstration of designing entry techniques in his book Trade Your Way to Financial Freedom (Crappy title, excellent read) pages 220-224.
He proposes measuring speed as "the distance travelled per X day period". X being your choice. Speed as an entry signal, "The speed indicator being one that moves
back and forth across a zero line....... when speed changes direction and accelerates in the opposite direction we have a possible entry signal"
Concept underlying the entry signal, "Increase in speed means that it is more likely to keep going in the same direction, decrease in speed may indicate a possible change in direction"
Formula for acceleration/deceleration, " Velocity change = [(Velocity today)-(Velocity on day X)] / time"
Findings: Van Tharp produces a small study of Wheat prices for the march 95 contract with comparisons for 20 day, 10 day and 5 day velocity. He notes a dip in acceleration just before important breakouts. He also notes that this study is to small to yield any significant findings.
Van Tharp concludes by suggesting that accelaration may possibly be used as a retracement setup: "look for decelaration just after a channel breakout". He also notes, "that the start of accelaration may give a low risk point at which to place very narrow stops"
Intuitively I believe there is a lot of merit in his findings, ie: I've often perceived an accelaration after a retest of a recently broken point of resistance. Volitility may also pick up these relationships. I've never tested these relationships because ............, ah, you know the answer! (this is why position trading is still a part time endevour for me.)
I also believe Pete Steidlemeyer confirms this concept in his Market Profile research. From memory he confirms an acceleration once prices are x standard deviations away from old support/resistance. I take this to mean that once prices move away from old s/r they rush to seek new s/r.
God, I'm rambling again... off on a tangent!"
Happy days
Bagua22 |
