RE: [EquisMetaStock Group] Low Volatility Stocks...RSI, MetaStock Email Archive

Lee,

Ever thought of using

Standard Error
SYNTAX ste( DATA ARRAY, PERIODS )
FUNCTION Calculates the predefined Standard Error
indicator.
EXAMPLE ste( CLOSE, 21 )

Standard Error Band Bottom
SYNTAX stebandbot( DATA ARRAY, PERIODS,
ERRORS )
FUNCTION Calculates the bottom Standard Error Band
of DATA ARRAY shifted downward
ERRORS standard errors.
EXAMPLE stebandbot( close, 21, 2 )

Standard Error Band Top
SYNTAX stebandbot( DATA ARRAY, PERIODS,
ERRORS )
FUNCTION Calculates the upper Standard Error Band
of DATA ARRAY shifted upward
ERRORS standard errors.
EXAMPLE stebandtop( close, 21, 2 )

Basically:

ste(CLOSE,21);
stebandbot(close,21,2);
stebandtop(close,21,2);

Preston

--- In equismetastock@yahoogroups.com, Lee Lucas <leeontherun@...>
wrote:
>
>
> Hi Steve,
>
> Looks like some excellent results! I have a very similar plan on
the S&P500 using long term Moving Averages with vertical %
adjustments as upper and lower bands which seems to work very well.
>
> You got me intrigued to look into your plan. I looked into
Standard Error bands and found a complex formula that still has some
minor errors in some calculations...
>
> http://trader.online.pl/MSZ/e-w-Standard_Error_Bands.html
>
> I was able to modify these with optimisations but quite frankly I
don't trust the original formula and it's too complex for me to
invest time into resolving.
>
> Can you offer any site reference or simple formulas to calculate
standard error bands so I can do some backtesting please?
>
> I think it would work very well on Gold on an hourly chart which
is my forte. Gold has some similar robust characteristics.
>
> Do you trade any other systems or do you only use the one and find
stocks to fit it?
>
> Lee.
>
>
>
>
>
>
> To: equismetastock@...: skeeter47@xx.: Fri, 27 Jun 2008 10:02:47 -
0700Subject: RE: [EquisMetaStock Group] Low Volatility Stocks...RSI
>
>
>
>
>
>
>
>
>
> Lee,
>
> Analyzing divergence is an art form. Over thirty years, I've
learned that I'm not that great of an "artist". Everything that I
have designed is mechanical. I've been accused of being
a "mechanical monkey"...a title that doesn't bother me at all. The
trick for most traders to take the emotion out of trading. Nothing
takes care emotion like a set of rules to follow. That doesn't mean
that traders will follow their mechical approach and try to outsmart
their own rules. That's akin to trying to figure out divergence
(subjectivity kills most speculators).
>
> Regarding the chart that I sent: The bulk of my trading is in the
futures market. If you have an approach that works, you maximize
your returns by moving to the markets that afford the greatest
leverage. I'm not a crusader for futures, but it works for me and
commodities have always been my love. When I was a broker, 95% of
my biz was in the futures market. As a CTA, I traded only in the
futures market. So, I feel very comfortable with the double-edged
sword of leverage.
>
> I trade eight or ten different markets with a very robust
approach. All entry and exit strategies are the same for all of the
markets I trade. What a concept: using the same approach on
grains, interest rates, etc. The only difference in the rules are
slightly different trigger levels on entry and exit levels (I think
due to volatility and the nature of the individual markets..."cocoa
isn't the same as the 10-year note"). Stops vary from $300 to
$800...also, depending on the nature of the volatility of the
individual market.
>
> For years, I was a swing trading momentum guy. I still believe
the StoRSI that I apply to the markets is the best tool that I have
ever developed/borrowed/stolen. Believe me, I have tried and tested
just about everything. I have over 20,000 hours of testing, in
MetaStock, applied to momentum oscillators. If there was an
oscillator that was more consistent, I would be using it.
>
> The problem with swing trading with momentum oscillators is that
once you are in a winning trade, the momentum triggers exits you
prematurely ... before the big money is made. This sets up
circumstances that I have struggled with over the years. I have
always been able to produce a high win/loss percentage, but have
always had average win to average loss rations just above 1.00,
When markets are trending, you take a small profit and maybe
(depending on your rules) you reverse your position (contratrend)
and immediately get stopped out. This causes very nice profits in
choppy markets and can get ugly in trending markets.
>
> Fund managers have always taken a different approach. They play
break-out and various trend following methods and produce a low
winning percentage (many times in the low 40%'s or lower), yet have
a very high average win to average loss ratio. After slamming many
numbers into sharpe ratios and ulcer indices, I finally (duh) came
to the knowledge that I must change my basic though process and
trading approach.
>
> At the beginning of the year, I switched to a momentum oscillator
entry and a trend following exit strategy. This strategy produces
40-50% winners, but the average win to average loss ratios vary from
3 to 9. The key to my current approach is diversification and the
sharpe ratios it develops.
>
> The blue line on the chart that was send was the moving average,
RSI oscillator that Super forwarded. I've attached the long bond
chart, without the blue line, and will walk through each signal:
>
> 1. The overview is quite simple. I initiate a position the
opening after a contract penetrates a trigger level on the StoRSI
(on 1/3, I shorted bonds...due to the close above the trigger level
on the previous day). Unfortunately, the position was stopped out
the following day for a $600 loss.
> 2. Everything is "reset" and I wait for another StoRSI
penetration of the trigger levels. This occurs on 1/22 and on 1/23
I entered a short position.
> 3. After I am in a position, I completely ignore the StoRSI and I
wait for a penetration of the opposite SEB (Standard Error Band).
In other words, if I am short, I am looking for a penetration of the
lower standard error band...if I am long, I am looking for a
penetration of the upper standard error band). Nothing will take me
out of the position unless it is stopped out or the market causes a
violation of the bands.
> 4. Once I get a close above/below the bands (depending on which
way I am positioned), I exit and move to the sidelines. The
exception: if a close is above/below the trigger level AND on the
same trading session the StoRSI also penetrates it's triggers, I
reverse the position. On 2/19, the market causes a close below the
lower SEB AND the StoRSI penetrated its lower trigger level. These
combined circumstances caused a reversal of positions on 2/20. The
same circumstances apply to the next trade: on 3/20 the market
closes above the SEB upper band (the signal to close the long) AND
the StoRSI punches throug the upper trigger...causing a reveral of
positions and a new short position.
> 5. Although the StoRSI penetrates its lower trigger many times
during the nex two months plus...I am only going to exit if the
close is below the lower SEB. This takes place on the 6/12 and I
exit and move to the sidelines. I don't reverse, because the StoRSI
hasn't gone below the trigger level.
> 6. It doesn't take long for the StoRSI to drop. The next day
6/13, the StoRSI closes below its trigger and I jump back in a long
position after being on the sidelines for only a day.
> 7.This morning, 6/27, I covered the long position (yesterday, the
close was over the upper SEB band). I am NOT going short. The
reason is in the rules: I need a penetration of the trigger level
to initiate a short position. Even though the StoRSI is above the
upper trigger level, I am not interested in a new trade unless the
previous day's StoRSI had traveled from neutral territory and has
moved through a trigger level. So, in this case, to initiate a new
short position, the StoRSI must move below the trigger level and
move above it once again. At that point, I will put on another
short. If the market continues down and drags the StoRSI below the
lower trigger level, then my next bond trade will be a long position.
>
> I know that this windy pontification is probably not the best
explanation available. But hey, I was educated in the Dee-troit
public school system and they taught ebonics. Sorry, if it is not
crystal clear. Hopefully, it sheds some light on how to combine
momentum oscillators and turn the position into a trend following
system.
>
> Most of the SEB settings hover around 55 periods and the triggers
for the StoRSI are optimized to 5's (i.e., 20-80; 15-85, etc.) All
are symmetrical. Asymmetry will test a lot better, but only a fool
would use asymmetrial triggers.
>
> I am trading 5, 10, and 30 year rates; corn, wheat and soy meal;
cocoa, coffee and sugar. The approach works with just about all the
futures contracts ... including the mini's. But, when you examine
the sharpe ratios and the drawdowns, you must draw a line in the
sand and chose the best performers.
>
> Hope this helps,
>
> Steve--- On Thu, 6/26/08, Lee Lucas <leeontherun@...> wrote:
> From: Lee Lucas <leeontherun@...>Subject: RE: [EquisMetaStock
Group] Low Volatility Stocks...RSITo: equismetastock@...: Thursday,
June 26, 2008, 10:18 PM
>
>
> Hey Steve, I have not been able to successfully backtest
Divergence. I think it more for chartists than formula following
backtesters like us. I can't tell anything from you picture other
than the fact that your system is working brilliantly. Can you tell
me what kind of indications your used to open and close on this
system? An MA of the RSI should follow the RSI tightly and basically
remove all of the minor bumps. It helps remove double and triple
signals when the RSI jumps up and down in the overbought and
oversold areas. Perhaps use a 7 or 14 day MA of the RSI. The blue
line looks like it has a 180 day MA applied to the RSI. The whole
idea of this methodology is to remove a few losers. I also use a
formula to say that the MA of the RSI must also be pointing up
before taking the long. Lee.
>
>
> To: equismetastock@ yahoogroups. comFrom: skeeter47@xxxxxx
comDate: Thu, 26 Jun 2008 08:59:04 -0700Subject: RE: [EquisMetaStock
Group] Low Volatility Stocks...RSI
>
>
>
>
>
>
>
> Lee, The blue line, in the upper frame on the chart, is what I
think is your RSI....is this similar or matching to your formula?
Keep in mind, divergence is a very nasty trap and can only be
applied randomly as it occurs. Divergence equals subjectivity. How
much does an issue diverge before you can safely time yourself into
a trade (a little divergence, a little more divergence, or ad nausem
divergence)? Many educators teach divergence with certain momentum
oscillators (RSI, CCI, etc.). But, none of them ever define how
much is the right amount of divergence. I'll stick with a faster,
more reliable and profitable StoRSI. Your thoughts? Steve--- On Wed,
6/25/08, Lee Lucas <leeontherun@ hotmail.com> wrote:
> From: Lee Lucas <leeontherun@ hotmail.com>Subject: RE:
[EquisMetaStock Group] Low Volatility Stocks...RSITo:
equismetastock@ yahoogroups. comDate: Wednesday, June 25, 2008, 5:18
PM
>
> Hey Preston, The thing I like about RSI compared to most other
indicators is that other indicators tend to be lagging indicators
where as an RSI can show a slowing or change in direction earlier
than the price shows. In combination I have also made a moving
average of an RSI i.e. Mov(RSI(C,14) ,40,E) and looked for cross
overs. This can cut out a lot of noise. Works similar to a MACD I
suppose. Further more Divergence which has been quoted as being the
most robust and secure oportunity to take a trade uses RSI or MACD.
For those who don't know of Divergence - this is when price
continues in it's direction while the other indicators (RSI or MACD)
have already turned to go back. The assumption is that price will
then turn back to keep up with the indicator.Lee.
>
>
> To: equismetastock@ yahoogroups. comFrom: no_reply@xxxxxxxxxx
s.comDate: Wed, 25 Jun 2008 14:27:21 +0000Subject: Re:
[EquisMetaStock Group] Low Volatility Stocks...RSI
>
>
> Lee,I would love to hear more about how you are using the RSI and
ATR. Also wondering if you have read Baeyens book on the RSI?Preston-
-- In equismetastock@ yahoogroups. com, Lee Lucas <leeontherun@ ...>
wrote:>> > It may be much easier to understand and see on a chart if
you can ship the backtest formula.> > I play alot with RSI and ATR>
> Lee.> > > To: equismetastock@ ...: andysmith_999@ ...: Tue, 24 Jun
2008 03:55:13 +0000Subject: [EquisMetaStock Group] Low Volatility
Stocks> > > > > I've been experimenting with this methodology: Every
weekend I use a screen to get stocks with certain fundamentals(
based on P/S, P/E, etc). Then I rank the list by 13 and 26
weekrelative strength and discard any stocks that are not near the
top onboth lists. This leaves me around 20 stocks per week. Then, I
look at the 20 charts to see which charts have nice, smooth,up
trends. I each chart is displayed:-- ATR(10), this is used to
calculate position size-- ATR(10)/Close, this is used to get a sense
of volatility-- ATR(10)/ATR(50), this is used to get a sense of "is
the stock morevolatile than usual"The ATR(10)/Close usually works
out to be around 3.5% to 5.5%. Here'sthe part I'm still grappling
with: I ignore any stocks above 4.5% sothat I end up with the
smoother, tighter up trends. Please share anythoughts on this.PS. I
owe much of this to Roy's newsletter and Super's posts over thelast
few years. > >
>
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