All of us who use technical analysis are used to Indicators
with fixed period of calculation. Also certain periods like 9 and 14 are taken
for granted. These indicators do not taken into account the market conditions. Sometimes
the market is volatile and not at other times. The velocity and acceleration
also differs at different times. The indicators are oblivious to all these are
mainly static. For example for CCI most people use 14 as the period whereas the
inventor of this indicator Donald Lambert has suggest one third of cycle
period.
I always have been a fan of John Ehlers. . Ehlers suggest that making the
indicators adaptive to the cycle period of the concerned market would be a
better solution. However he suggested using fraction of the cycle part in
adaptive formulas. One of my first trials on this concept was an adaptive CCI
which I called as KCCI. Of course many of you who had visited my web site (Now
almost defunct) would be aware of this. I am enclosing a image of the adaptive
CCI(KCCI) with the conventional CCI. You can notice that the whipsaws are
lesser in the KCCI compared to the conventional one. You can experiment with it
by optimizing the cycle part.
Many thanks.
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