I am posting after a
gap. Got hold of some original Wyckoff stuff and has been spending some time on
it. More about it in a later post. Today I am presenting a Regular Classical
Indicator RSI with a variation, a RSI with dynamic levels. No I am not talking
about the RSI with Bollinger bands around it.
In the Stocks &
Commodities V15:7 Leo Zamansky and David Stendahl talked about dynamic zones. They
said that oscillator driven systems lack the ability to evolve with the market because
they use fixed buy and sell zones. Typically the set of buy and sell zones for
a bull market will be substantially different zones for a bear market. We need
to have a system automatically define its own buy and sell zones and thereby profitably
trade in any market — bull or bear. Dynamic zones offer a solution to the
problem of fixed buy and sell zones for any oscillator-driven system. The idea
of their system was to create a distribution of the signals in the given look
back period. Then we have to find the value which is equal to the desired
probability.
First of all the assumption
is the distribution is normal distribution is a little far fetched actually. On
that assumption we need to do the laborious calculation of the making the
distribution and calculating the probability. But I would like to keep things
simple. Trading is art and not complicated science. Precise calculation will
not immensely improve your trading system. In order to simplify the matters we can just
assume uniform distribution and calculate the probability accordingly. I knew
people will find it difficult to accept this. However even this simplification
will provide a adequately dynamic zones.
Here I am presenting the conventional RSI with Dynamic Levels. Also in
order not to confuse with widely available Dynamic
Zone indicator with Bollinger bands I will call this indicator RSI with Dynamic Levels.
