Friday, April 26, 2013

Adaptive Indicators - 2 . Adaptive Stochastics

Last week we looked at an Adaptive CCI. Now let us look at extending our experiments in creating a adaptive stochastic. As you are aware the stochastic indicator calculates the difference between the current close and the lowest value in a range as a ratio of  the entire range. This ratio is converted to a percentage and then a small smoothing is applied.

%K = (Current Close - Lowest Low)/(Highest High - Lowest Low) * 100

The Lowest low and Highest High is calculated over a specified look back period. Here we will calculate these values on the Dominant cycle (DC) period. The  DC is again calculated using the Hilbert transform of John Ehler.  The DC period is a varying parameter depending on the market condition and the Stochastic calculation is automatically adjusted as per the varying DC period making it adaptive to the Market condition.

You can see in the chart below that the adaptive Stochastic is giving less whipsaws and is smoother. The afl is also provided for you to experiment. Do share your finding and thoughts.

The KStochastic afl

Saturday, April 20, 2013


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.

I will discuss more about other adaptive indicators in the coming posts. The afl is shared here

Friday, April 12, 2013


Finally we have the so called Super ADX, I mean a clone. I could get the time to finalize it after a long time. It is based on the MT4 super ADX indicator. First of all I wish to clarify that it is not the Holy Grail.  Of course we should understand that if one had the Holy Grail Indicator we would never share it any body at whatever price. Since he is not able to make enough money with that system from the market he is trying to make money by selling it. The newbie trader should first understand that there are always many people with their eye on his purse. Everyone wants a few bucks from his purse. Some take it legally by selling something and some steal it.
Coming back to the Indicator, Let us see what this does.  The indicator first calculates the difference between the moving average of the average price and the moving average of the close.  This is taken as a measure of the strength of the trend. The change of directions of this strength measure is a reversal point. However the validity of the reversal point is made when the ADX (Another measure of trend strength) is either above a value of 35 (normally end of a trend) and below a value of 10 (for starting of a Trend). It also looks at reversal of the MACD. Finally   it also looks at multiple reversals within the last 15 bars. Different signals are generated for different type of reversal signals.  The different signals are as follows.
1.       A red bar would indicate that a big move is imminent.
2.       A white bar would indicate that it is the end of the big move and hence exit.
3.       A yellow bar or a violet bar would indicate a possibility of a reversal of the current trend.
4.       A magenta bar would indicate that multiple signals have occurred and possibility of a reversal is very strong.
Also it should be noted that the exit signals is not generated in all cases. Similarly the Big Move indication is also not generated every time. But whenever it happens it will be a good opportunity. Also reversal signals are not generated every time reversal is imminent.
The super ADX also uses a indicator which they call Money line. This line is used as the exit point though I did not find it correct. Normally a Linear weighted Moving average of period 40 should be good enough as a money line. 
So try out the indicator and provide your feedback. I only hope that unscrupulous elements don’t take this and commercialize this as they have down with other my other indicators.

Friday, April 5, 2013

The ADX Afls...

I have been experimenting a little on the volume biased ADX which I had propose in my last post. I found that volume spikes could drastically upset the the indicators. SO i had to use a little smoothing to overcome this. That is the reason for not releasing the afl. Now  I am ready to release it for those who would like to experiment. I am also posting my earlier work, a Gaussian smoothed ADX called KADX which is more responsive ans smoother than the classical ADX. Please share your opinion about these indicators.

1. Volume Biased ADX

2. Gaussian Smoothed ADX - KADX