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Strategies & Market Trends : Technical Analysis- Indicators & Systems

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To: Bill Sandusky who wrote (1617)	6/17/1997 6:10:00 PM
From: Bruce A. Bowman	of 3325

The problem isn't visible over a fixed range of data. If you could see it clearly (and I doubt that you can), it would show up with a stock that causes the greatest change in range in one of the indicators used in the crossover. You would have to slide thru the data and watch where the crossover occurs. With enough dynamics in the data you should see the exact day of the crossover change as the data moves across the screen. How much it changes is determined by the change in amplitude of the most dynamic indicator. The phenomenon is easily visible on TC2000 taking 2 very unlikely candidates like OBV (which can increase without bound) and a slow stochastic (which is bounded by 0,100). This should work on TS as well. Plotting both in the same window, each with its own scale, then sliding thru the data with a stock which has rising OBV from a flat base will cause the day of a crossover of OBV & stoc to change as you progress thru the data. OBV has a relatively flat slope while even a slow stoch is quicker. As OBV continues to increase, it's slope keeps getting flatter and flatter. But the stoch always has the same relative slope in the window no matter what later data does to change either OBV or the stochastic.. OBV/stoc is an extreme example and one that you aren't likely to pair up. All I'm doing is trying to offer an illustration of the displacement of the crossover because of automatic rescaling. When you apply the same pair of indicators to a different stock, the relationship is going to be different because the preconditions are different. All that said, it doesn't mean squat if you get a message from a chart that combines these in the same window. What's important to me in terms of being mathmatically correct may obscure the message which the relative positions have for you. In the same way, I wouldn't plow a field using a 4-bottom share behind my Camry, but if Farmer McCarthy can unearth gold nuggets that way, he'll be rich and I won't. It's whatever works for you. Bruce ps: got your charts, but I was at a loss how to read the crossings, hence the OBV/stoch example. Sorry for not addressing the specific indicators. Overlaying the indicators won't change in the same time frame, so you shouldn't see a difference by simply putting them in one window. What will change is the historical relative crossovers as time moves forward. This means that test results can vary as a function of how much data you load. How much it changes depends on the arithmetic variation of the indicators.

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