Revisiting some indicators

I have been looking for a way to improve my strategies and today I went back and did a bit more research into some indicators – this time DPO, RVI and RAVI.

The following page was interesting for DPO. It talks about the price being above or below a shifted moving average and the values respectively shown in the DPO.

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:detrended_price_osci

So to create this,

  • the MVA must be the same number of periods as the estimated cycle.
  • the DPO is set to half the number of periods in the cycle
  • the MVA is shifted by a quarter of the number of periods in the cycle + 1 backwards.

Also from http://www.barchart.com/education/std_studies.php?what=std_detpo

  • When the DPO shows a lower peak, expect a downturn
  • When the DPO shows a higher trough, expect an upturn in the current cycle

In the picture below, the two times we had lower peaks, there was a big downward move after. Something to look into.

For RVI, I discovered that while my calculation was correct, I was using the values wrong. The RVI values should be smoothed with a moving average and also a shorter moving average is created for a signal line. Signals are generated as per expectation when they cross.

After quickly implementing this, it looks pretty good. Though, after this I discovered that the original implementation did a far more complicated moving average. I’ve found the original spec and checked it into SVN, and implement this. This produces a much smoother graph and eliminates some whipsawing, but does seem a bit more laggy. I guess this is to be expected.

Later, I’ll try to see how I can use RVI in my strategies.

Also, I took another look at RAVI. It turns out it is most useful for Trending strategies, so I should also see if I can use RAVI to improve my trending strategies. The right way to use it is to establish some lines, where if the value is in excess of these lines, then the trend is forming/strong. For example, +/- 0.3 seems to be a good one… or +/- 0.1.

Also, we should ensure the value of RAVI is increasing/decreasing accordingly.

http://www.tradingsystemforex.com/expert-advisors-backtesting/596-ravi-expert-advisor.html

Posted in Indicators, MarketScope, Research, Strategies, Trend and tagged , , , , , , , .

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