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Strategies & Market Trends : TA Science Projects & Experimental Indicators
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To: Smooth Drive who wrote (230)12/20/1998 9:09:00 PM
From: ftth  Read Replies (1) of 237
 
Hi Eric, for an indicator line, I generally will use the close as a first pass because the standard deviation of the open, high, and low lines are generally much higher than the close (but it depends on the volatility of the stock). I use the o-h-l for 'other' purposes.

A MA of some different combination of o-h-l-c may give a curve that more closely tracks the price plot, but that's not always the objective. So, I guess it depends on:
--what you're using the indicator line for
--what other indicators you're using
--past behavior of the stock relative to the MA line you're plotting.

I like to try and find (or fit) a MA line that the stock has been responsive to in the past. It doesn't need to necessarily bounce exactly off the line, it just needs to correlate well. It may sound like a lot of work to tweak the MA line to find one that's representative of the stock's behavior, but after you've been doing it a while you can zero in on it in a matter of seconds (or find out quickly that there isn't an MA line that by itself is very representative).

If I don't find a decent correlation to an MA line, I don't rely on the MA much, if at all, for that particular stock. The logic being, if it hasn't shown any consistent behavior in the past relative to some MA line, no reason to believe it will begin to all of a sudden.

dh
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