Quest for a NEW predictive BUY signal indicator

Discussion in 'Technical Analysis' started by Rusty99, Apr 2, 2009.

  1. Rusty99

    Rusty99

    Have you noticed that most of the technical indicators are very old, most being developed more than 20 years ago, and many 50 years ago, well before the age of computers.

    There are two issues here: 1. computers provide a fundamental shift in the way indicators can be developed. 2. Computers have fundamentally changed the way the entire market functions and behaves because computers provide instant information.

    If you look at the details of the derivation of the indicators that all of us use you will see that most are very primitive and simplistic, despite heir widespread use.

    I have been looking for new modern indicators that provide better predictive power. My idea is to focus on parameters that change just before a stock starts a new surge. Sure there are many sudden announcements etc. that are unpredictable. But often there will be signals in the few days prior to a rise that are partially due to the way that the market behaves and the effect of some new activity or interest in the stock. I have been focusing on the following parameters used to provide a buy signal:

    Increase/decrease in Volume
    Close in the top half of the daily range
    The size of the daily range
    Gaps i.e. sudden increase in mean daily price compared with yesterday’s mean.

    I have been developing an index that uses a combination of these parameters. So far the results look promising and the index gives a signal one to four days before the price surges.

    I would be interested on your comments about these and other signal parameters and new indicator methods that attempt to do the same thing.
     
  2. oraclewizard77

    oraclewizard77 Moderator

    I like the chaos buy sell indicator. It tells you in real time when either a large number of contracts say 200 - 300 are being bought by buyers or sold by sellers.

    It also comes out on my speakers, so I can view my other indicators.

    I like my redesigned market top and bottom indicator. It tells me exactly when a market top or bottom has been formed, allowing me to scalp long or short.

    I also like my fade indicator, it tells me when most of the traders are on one side of the market so I can fade their trades as their stops get blown out.
     
  3. BT247

    BT247

    One thing to look at for sure is market breadth. I use a price/volume relationship scan for all the major indices, other market breadth indicators are important as well-they have predictive power.

    Here's an accumulation/Distribution indicator I use that does a good job of letting you know what the deal is with the trend and calls reversals pretty well.

    <a href="http://www.flickr.com/photos/23623637@N05/3475162848/" title="Picture 8 by BT24_7, on Flickr"><img src="http://farm4.static.flickr.com/3319/3475162848_9070911fb3.jpg" width="500" height="313" alt="Picture 8" /></a>

    That was a pretty ugly divergence at the end of the day Friday right before the sell-off-(60 min chart)
     
  4. Rusty99

    Rusty99

    Thanks for your reply. I'll have a look at your indicator.

    I have developed an indicator that I call VPRS - Volume Position Range Signal.

    This new simple indicator that is aimed at finding stocks that show changes in bar patterns that may give an early signal of a likely surge in price.

    The indicator uses the following components.

    => The absolute rate of change of volume as a percentage
    => The relative position of the close on the True Range as a percentage
    => The absolute rate of change of the True Range as a percentage

    The components are simply added and the signal smoothed using a 2 period moving average.
    The advantage of such simple signal is that it is easy to interpret in terms of the components.
    For example a high signal means that the closing price is close to the high for the bar, and both the volume and true range (spread) have increased or decreased substantially. A rapid rise in value from a deep trough is used for the screener.

    The indicator is used as a buy signal, but is mostly used for screening stocks for further analysis using VSA concepts and other bar pattern and indicator methods.
    It is combined with a price signal or indicator. A chart is shown below. It gives a very early signal of a price surge.
    It is related to the Money Flow Index and other indicators, but as far as I'm aware is the first to integrate these 3 components.
    I would be interested in your comments and finding out about in other similar approaches.

    Cheers,
     
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  5. This is also true about physics. All fundamental theories, like Relativity and Quantum Mechanics, were developed something like 80 to 100 years ago. No major breakthrough since in terms of a fundamentally new theory.

    Michael Harris developed a new indicator about 10 years ago, the p-indicator. This is an indicator for short term/high frequency trading based on price patterns. He gave a basic description in his first two books but no mention in his more recent book and I heard in other forums that he is using it in his own trading. The concept is much different from that of fundamental indicators because the p-indicator involves backtesitng results. There is some information on his website but I have been unable to come up with something that works since the explicit structure of the indicator is not disclosed. I am very interested in including volume in this indicator as well.
     
  6. What did I tell you, an academic theorist!


    :)
     

  7. I've never used it so I don't know how effective it might be but how about DeMark TD Sequential?

    It's relatively new compared to the rest of the stuff out there and it seems to do a similar job to what you're doing in terms of reversals/bounces/surges, or whatever you want to call them.