The name RMO is all about marketing. In the
world of TA nearly all
indicators are sold on the "mystery" and not the performance.
It's selling the sizzle rather than the steak. If Equis had said,
we're putting in the Rainbow OSC into MS 10, want to upgrade? Well,
you better step back because the stampede is coming!
Equis built a whole marketing campaign around the RMO based on what a
great system it is. It's performance is based on the same fundamental
issue. In a definitive trend nearly anything works well. This premise
about definitive trends seems so simple, but many people ignore it, or
worse, assume they get it. The best book that really defines the
importance of knowing the trend is How I Trade for a Living by Gary
Smith.
Anytime something comes out that's new, the code hacks start the
reverse engineering. Often it's simple.
It's surprising how much mystery sells. My favorite example is the CS
Scientific expert based on fuzzy logic. There are more questions on
that than any other expert in MS. It's amazing how many people think
it's the most accurate expert in MS. Many people have tried to track
down the developer, the company or anyone that knew them so they can
"buy" the code.
When I tell people it's simply a moving average crossover, they think
I'm lying to them, or I don't know what I'm talking about. Moving
average crossovers are based on stocastics so they're fundamental
fuzzy logic equations. In the ribbon indicator, there's a std dev
thrown in so now it's really getting into deeper fuzzy logic.
Mystery is wonderful. It just doesn't make anyone but the seller any
money.
Super
--- In equismetastock@xxxxxxxxxxxxxxx,
pumrysh <no_reply@xxx> wrote:
>
> GV,
>
> You are correct, I would like to see an easier version of the
> indicator even though I know that a SMA(6) is very close. While 1%
> at this quick/short of a lookback is not much I can't help but think
> that the further out you go the bigger the difference would be.
>
> I also mentioned that not all programmers lay all their cards on the
> table. I was talking about myself, not Wabbit. To see all of the
> Equis forum discussion go to:
>
> http://forum.equis.com/forums/thread/23170.aspx
>
> As far as the RMO versus the Rainbow, I would have to say that
> little was ever published about the Rainbow. What we have then is an
> enhanced version of the Rainbow which happens to be called the RMO
> and that's quite okay. Maybe the name should be changed to "RMO...an
> enhanced Rainbow Oscillator System".
>
> I'm really glad that you have been able to learn something from the
> discussion. If we've stimulated some other minds as well then its
> been a really good day.
>
>
> Preston
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx,
"Vasanth Mohan G Buddaan"
> <vgbudawn@> wrote:
> >
> > I take Preston saying "...and would love to see a shorter / easier
> version of it" to be an invitation to take the discussion further.
> >
> > Actually wabbit himself in his post has nicely dissected the
> recursive averaging to its well approximated simpler version as
> below;
> >
> > "...it might be interesting to note that the
> AverageOfMovingAverages (the mathematical average of the ten 2 bar
> SMAs) is ALMOST the same as a much more simple _expression_, Mov
> (C,6,S). If you compare the PRECISE VALUES of the
> AverageOfMovingAverages and the Mov(C,6,S) there is always a small
> difference, but, if you compare the instances when the CLOSE crosses
> the AverageOfMovingAverages and the instances when the CLOSE crosses
> the Mov(C,6,S) they are the same, with about 3-4% error. If you
> apply one bar latitude in either direction, the two expressions are
> the same within 1%. Thefore, for testing when the CLOSE crosses the
> AverageOfMovingAverages the trader could easily substitute Mov
> (C,6,S) for the more complicated _expression_."
> >
> >
> > But what I was more interested in RMO was not the formula in
> itself which when the indicator itself is available has no more
> additional use but how it, so well, tackled the 'gaps' or the
> wildness of a couple of ticks in the direction opposite to the
> trend / position. Most usual MACO system would have created a lag
> and if a signal had been generated in that skew it would have
> carried on for quite a while but was not so in RMO. When the whole
> Rainbow Indicator formula itself is taken for studying, the process
> does not become obvious but when the simplified version of wabbit is
> considered it makes eminent sense.
> >
> > What better way than to average the skewedness of a couple of
> ticks with more saner ones prior or past to them to reduce the
> impact of this skew. Simple averaging of essentially a short period
> makes sure equal weightage is given to the saner ones regardles of
> their positioning - whether before or after the 'gaps' / the sudden
> spurts thereby reducing the impact of this few stray behaviour of
> the market while still in a larger trend. Then the resultant output
> can always be used for long period averaging to make sure one sits
> through the trend inspite of these few stray & adverse ticks. In
> hindsight, it all looks so very simple & logical. I seriously wonder
> whether the the designer of RMO himself realised it, for if he had,
> he could very well have gone for the long period exponential
> averaging of the simple moving averaging like Mov( Mov(C,6,S) , 81 ,
> E ) instead of choosing to average the Rainbow Indicator thereby
> losing some amount of original thinking.
> >
> > While wild moves of very short term in nature is ignored, the
> adverse effect of this would be a much more severe lag because of
> the initial simple averaging. In other words, this sytem while
> avoiding smaller and sharper strayness would either get into the
> trend later but by which time the probability of trend having set in
> would have become high. By same logic, it would also get out of the
> trend later. Or take bigger loses / bigger whipsaws when prices
> trade in larger ranges due to its lack of sensitivity. That is,
> while avoiding smaller whipsaws it will take larger ones (though
> they may be fewer) but also lose good amount of profits at the time
> of exits even when in trend which explains the words of Big
> Papa "..For all the testing of the RMO I have done, it is good at
> getting in, but terrible at getting out.."
> >
> > The limitation of any Moving Average System has probably been best
> described by Preston...
> > "If the lag is removed then there are more whipsaws. If the
> whipsaws
> > are dampened, then the moving average is later to the party. There
> is
> > only so much information that can be extracted from price and
> volume
> > data no matter how many ways it is tortured, twisted and
> manipulated."
> >
> > Must thank everybody who contributed for a good learning period
> for me.
> > gv
> >
> >
> >
> > ----- Original Message -----
> > From: "pumrysh" <no_reply@xxxxxxxxxxxxxxx>
> > To: <equismetastock@xxxxxxxxxxxxxxx>
> > Sent: Friday, February 20, 2009 4:01 AM
> > Subject: [EquisMetaStock Group] Re: adjusted moving averages
> &zerolagoscillators
> >
> >
> > > GV,
> > >
> > > Today you have learned the formula to the RMO/Rainbow and that
> > > programmers never lay all there cards on the table.
> > >
> > > I'd say you've learned quite a bit.
> > >
> > > I actually like the recursive moving average and would love to
> see a
> > > shorter / easier version of it.
> > >
> > > Preston
> >
>