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This is what I have:
http://www.markbrown.com/brown.htm
The following is an excerpt. For the complete article, see the
December 2000 issue of Active Trader magazine.
Trading the momentum of market breadth
One of the best ways to keep track of the market's true dynamics is to
monitor its advancing and declining issues. Here's a strategy that
uses the momentum of advancing issues to time short-term trades.
By Mark Brown
The S&P tracking stock (SPY) and the S&P 500 futures contract probably
are among the most difficult markets to trade. Statistics would most
likely show the futures contract toward the top of a group of markets
responsible for the quickest depletion of customer trading accounts.
Most short-term traders trade the S&P 500 markets using timeframes
ranging from a single tick up to one hour. When trading in these
shorter timeframes, it's easy to become disoriented and lose track of
the true market dynamics.
One tool many traders use to track "internal" market strength is a
breadth indicator such as the advance-decline line (the running total
of advancing NYSE stocks minus the declining stocks). The changes in
the number of advancing or declining issues can offer a glimpse of
market dynamics not immediately revealed by price action. For example,
even if the market is rising, a declining advance-decline line may
indicate these gains are being fueled by a progressively smaller
number of stocks, in which case a correction or reversal may be
imminent.
While breadth indicators are commonly used to gauge longer-term
directional strength, intraday analysis of advancing or declining
issues can be used to develop shorter-term trading strategies. Here,
we'll look at how measuring the momentum of advancing NYSE stocks on
an hourly basis can be used to time trades.
Breadth of fresh air
It is well-known that the combined directional bias of the NYSE
advancing, declining and unchanged issues lists are helpful in
determining the overall direction of the S&P 500 index and S&P
futures. Traditionally, studies have been based on either a
combination of the advancing and declining issues (such as the
advance-decline line described previously), or the advancing,
declining and unchanged issues.
One simple trading model based on this approach is the "Oddball S&P
system," which uses hourly readings from the NYSE advancing issues
list. This timing model is based on the theory that in the short-term
the S&P futures (and even the actual S&P index) and the market breadth
may deviate from time to time, but they will nonetheless align
themselves when large moves are made.
The original purpose behind this strategy was to use
advancing/declining/unchanged numbers to identify high-volatility
situations that showed the highest likelihood of having a directional
bias. However, research and testing showed it was sufficient to use
the advancing issues alone - not just as a filter, but also as a
stand-alone trading strategy. In addition, as mentioned earlier, using
only the advancing issues numbers makes the approach less complicated.
As a very basic trading approach, this strategy also functions as an
excellent benchmark against which to compare other systems.
Measuring momentum
The strategy is based on calculating the rate of change (ROC) of the
hourly advancing issues number. ROC, which is an oscillator-type
indicator, is the difference (or alternately, the ratio) between the
current price and the price n periods in the past. For example, the
five-day ROC would be the difference between today's price and the
price five days ago. On an hourly chart, the five-period ROC would be
the difference between the current price and the price five bars
(hours) ago. (For a more thorough discussion of the ROC indicator, see
"Indicator Insight: Momentum and rate of change," Active Trader,
October, p. 82). Because there are seven hours in the trading day, a
seven-period ROC of the advancing issues number was used in this
strategy.
One way to construct an oscillator-based system is to trigger trades
when the indicator crosses above and below the "zero" line (the median
line that represents neutral momentum, when the current price is the
same as the price n periods ago). But a better alternative is to use
two separate indicator levels, or zones - one to initiate long trades
and another to initiate all short trades.
A good initial setting is to set the buy level to 3 percent, and the
sell level to 1 percent. That is, you buy as soon as the rate of
change of the advancing issues is 3 percent higher than it was seven
periods ago and sell as soon as it falls below 1 percent higher than
it was seven periods ago. (See "Strategy snapshot," below, for the
precise formula for the indicator.) This means the system will always
be in the market, either with a long or short position.
The indicator settings used here were selected to keep the strategy as
straightforward and simple as possible for testing. Traders may, of
course, experiment with other indicator settings to see if they
produce better results. Similarly, a different oscillator-type
indicator could be substituted for the ROC. The underlying system
logic and trading approach would remain the same.
In short, the oddball S&P system works as follows:
.If the rate of change of the advancing issues is greater than the buy
trigger level, buy the market.
.If the rate of change of the advancing issues is less than the sell
trigger level, sell the market.
Every hour, on the hour
Because this system recalculates every hour on the hour, up to and
including the close of the stock market at 4 p.m. EST, you will not be
able to use the last reading of the day if you are trading the S&P 500
tracking stock (SPY). However, if you are trading the S&P futures, you
will still be able to enter a trade based on the last reading because
the futures market continues trading until 4:15 p.m. EST.
For either market, this also means that you will have to wait for the
first reading at 10 a.m. EST to trade in the morning. But this is
actually advantageous, because as so many professional traders point
out, you should avoid trading immediately after the open because of
the directionless volatility that often occurs before the market finds
its direction and pace for the day.
This kind of trading strategy is strengthened by the fact that it is
easy to monitor and execute, and it is based on one primary input. The
one-hour timeframe was selected because it is outside of the typical
short-term trader's time horizon, and also because consistency is a
key factor when implementing a mechanical model. It is easy to check
your trades each hour on the hour, or to program your laptop, mobile
phone or handheld computer to do so for you.
Also, only using one data point per hour also enhances the reliability
of the model. Why? Because when you view an intraday chart and observe
a bad price print it will most likely be the high or the low of the
given bar. By eliminating all data points but the close, you also
reduce the possibility of errors.
=================================================
Strategy snapshot
Strategy: Oddball S&P system
Approach: Systematic, stop-and-reverse (always in the market)
Market: Index tracking stocks (SPY, QQQ) and stock index futures
Indicator setup: Create a rate-of-change indicator of the hourly
closing values of the advancing issues of the NYSE. Include only the
closing data point of the natural hour, starting at 10 a.m. and ending
at 4 p.m. EST. To calculate the indicator, use the following formula:
Rate of change in advancing issues
(RAI ) = ( AI / AI[n] -1) *100,
where
AI = Latest number
AI[n] = Number of advancing issues n periods ago
Entry: A buy signal is issued every time the indicator is greater than 3.
A sell signal is issued every time the indicator is less than 1.
Exit: Stop-and-reverse. Positions are reversed with each new buy and
sell signal, as described above.
Risk control/money management: There is no money management technique
employed other than the system stays in the market 100 percent of the
time, either long or short, with a constant number of contracts.
Note: If a trade is signaled at 4 p.m. EST, you have 15 minutes until
the close of the market to place the trade in the S&P futures (it is
not possible to do this when trading the SPY). This avoids the pitfall
of basing real trading on unrealistic system tests that generate
signals on the close at the end of the session, when the trade can in
practice only be initiated the next session. In such cases the price
may have moved farther away from where the test indicates the system
was filled, giving a false reflection of the system's performance.
==================================================
{Data1 = Either the SPY S&P 500 index tracking stock or the S&P 500
commodity futures contract. Data2 = Advancing issues of the Nyse.
note: adjust for your time zone the times are currently set for
Chicago.}
Inputs: RL(7), BZ(3), SZ(1);
if time>830 and time <=1500 then begin
If ROC(Close Data2, RL) > BZ Then Buy;
If ROC(Close Data2, RL) < SZ Then Sell;
end;
----- Original Message -----
From: "Yoda" <mothura@xxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, November 09, 2001 5:17 PM
Subject: [RT] Oddball Ela
> If its is possible can someone post the Oddball system either for Ts4
> or Ts2000
> I had it at one time but had a computer crash and im in the process
> of setting up the systems again
>
> Thank you
>
>
>
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