Can someone help me?...

Discussion in 'Technical Analysis' started by dEvNuL, May 29, 2003.

  1. dEvNuL

    dEvNuL

    Hello,

    I have always been interested in technical analysis, but I have ran across something which just has me utterly confused... I am hoping someone can help me make sense out of... I am trying to use someone elses published method just to experiment with, but am having a heckuva time with the final piece....

    Assuming I have the following closing prices I want to recognize trends in:
    Code:
    Day | Close
    1   | 550
    2   | 525
    3   | 500
    4   | 510
    5   | 490
    6   | 490
    7   | 500
    8   | 540
    9   | 580
    10  | 560
    11  | 580
    12   | 600
    
    I expand this table with some "lag" data for the previous 1,2,3, and 4 days... For this I compute the price movement and the percent movement compared to the "Nth previous day".. So what I have are the same 12 rows as above, but now with 8 extra columns... For example:

    Code:
    DAY|CLOS|    -1|    -1%|    -2|    -2%|    -3|    -3%|    -4|    -4%
    100| 550|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A
    101| 525|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A
    102| 500|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A
    103| 510|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A|   N/A|    N/A
    104| 490| 20.00| -0.041| 10.00| -0.020| 35.00| -0.071| 60.00| -0.122
    105| 490|  0.00|  0.000| 20.00| -0.041| 10.00| -0.020| 35.00| -0.071
    106| 500|-10.00|  0.020|-10.00|  0.020| 10.00| -0.020|  0.00|  0.000
    107| 540|-40.00|  0.074|-50.00|  0.093|-50.00|  0.093|-30.00|  0.056
    108| 580|-40.00|  0.069|-80.00|  0.138|-90.00|  0.155|-90.00|  0.155
    109| 560| 20.00| -0.036|-20.00|  0.036|-60.00|  0.107|-70.00|  0.125
    110| 580|-20.00|  0.034|  0.00|  0.000|-40.00|  0.069|-80.00|  0.138
    111| 600|-20.00|  0.033|-40.00|  0.067|-20.00|  0.033|-60.00|  0.100
    
    All of this is fine-and-dandy, and I decide to add some patterns to this data, this is a bit trickier but I will try to explain what I did....

    For each -N% field I compute the average percentage change and double it, so for example, -1% ends up with ".077"... I'll call this value "P"...

    So, for each row, I compute a value as follows:

    NOTE: CLOSE[N] is the CLOSE of the previous Nth day (N changes depending on which column I am computing, for example in -1 it is just the previous days close, for -4 it is the close which occurred 4 days ago)...

    (CLOS-CLOS[N])
    --------------------
    (CLOS*P)

    So I end up with the following when computed this way, adding 4 columns of data for each row:

    Code:
    DAY|X(1)   |   X(2)|   X(3)|   X(4)
    100|  N/A  |    N/A|    N/A|    N/A
    101|  N/A  |    N/A|    N/A|    N/A
    102|  N/A  |    N/A|    N/A|    N/A
    103|  N/A  |    N/A|    N/A|    N/A
    104| -0.531| -0.197| -0.502| -0.638
    105|  0.000| -0.394| -0.143| -0.372
    106|  0.260|  0.193| -0.141|  0.000
    107|  0.964|  0.894|  0.651|  0.290
    108|  0.897|  1.332|  1.091|  0.809
    109| -0.465|  0.345|  0.753|  0.651
    110|  0.449|  0.000|  0.485|  0.719
    111|  0.434|  0.644|  0.234|  0.521
    
    
    Now up to this point everything is perfect... I have the output I should have and everything checks out... But, I get lost with the next statement:

    "When the price advances by more than [THETA] percent, the day on which the lowest close was made is flagged as an ideal buy signal. When the price declines more than [THETA] percent, the day on which the highest close was made is flagged as an ideal sell signal."


    From here, I believe that what is referred to as [THETA] percent is what I called "P" in my earlier example..... What I am confused about is what is meant by a "price advance" or "price decline"... If I assume that it is my -1% column (which may or may not be correct - BLECH!) then how am I to go about finding a reasonable time period for the "lowest low" and "highest high"...?... The data which I am playing with is for a couple of years, so surely it is not meant to be the "lowest low for the past year"....

    Any ideas on how to make this complete?..

    Thanks everyone!...

    - Greg