Just so everyone knows, you can't respond to the same message twice; SI will overwrite the first response without warning!
I had written up a description of the theory behind my WINS tool, and how far I've gotten with it. I don't want to rewrite all of that, so here's a copy of the mail I've sent to Herm about it:
The Theory
I've been thinking about how to make a WINS predictor. It seems like it would be really useful to be able to enter a stock symbol, adjust the BB/RSI parameters, and have the computer figure out which part of the cycle the stock is in. I've come up with some ideas I'd like to bounce off you...
First, we need indicators to work off of. I'm thinking of using %b and RSI. They both have farily limited ranges (0-100, more or less) so they should be easy to work with.
Next, we need a way of determining which part of the cycle the stock is in. It seems like the best way to do this is based on trends; the stock is Withdrawing when both %b and RSI are falling, and Increasing when both %b and RSI are rising. The normal BB/RSI chart is good for a human to pick out trends, but a computer isn't as good at that kind of visual pattern matching.
Instead, I'm thinking of using the Three-Line-Break and/or Kagi charts. When a stock's prices are plotted on these charts, you get a trend prediction for each day. (White box/Black box, or Blue line/Red line, which show uptrend/downtrend.) So, what do you get if you take the %b and RSI data, and plot them using a TLB or Kagi chart? You get the trend for %b and RSI!
So we get this kind of chart:
%b Up, RSI Up: stock is Increasing
%b Down, RSI Down: stock is Withdrawing
%b Up, RSI Down: stock is Neutral
%b Down, RSI Up: stock is Neutral
I would plot this by drawing a line through the closing stock prices for each day, using different colors: Blue for Increasing, Red for Withdrawing, and Green for Neutral. Below that, I could put TLB or Kagi charts for the stock price, the %b, and the RSI. (The volume bars should probably be worked into this too, somewhere.)
The parameters that you would need to enter to produce this chart are:
- Stock symbol
- Chart period
- BB days
- BB standard deviation
- RSI days
- Break chart sensitivity (2 line, 3 line, 4 line, etc)
The Implementation, after a weekend of work
Well, I've implemented the underlying structure for the WINS indicator, and now I'm ready for analysis.
webbindustries.com
Basically, I need to figure out which of W, I, and N apply to each combination of trends, when I plot the trends using three-line-break charts for the price, the %b, and the rsi. There's a description under the charts on that page which gives more details. As usual, this wasn't as simple as I had hoped.
Take a look, and let me know what you think. It'd be real handy if you gave me some stocks that you fell worked very well with WINS, and some that didn't work well at all.
Doug. |
