Experiments in Technical Analysis

[karthikmarar]

Thank you Karthik ,a modification on your Z score,is some times working as confirmatory & some times as Leading indicator,on 1min chart.

Thank you my friend. You seem to have worked out a nice variation.

When we apply a fisher transform to a normalized indicator we can approximate to a normal distribution. I did try Fisher transform on the NPO and failed. Inversefisher transform does work but does not improve the NPO any further.

hi Karthik

I thought about it for a while and figured out the answers to the Qs that I had, so decided to delete my post.The indicator is indeed quite useful if used correctly, I am currently looking at variations of it on intraday data.

Cheers

Ah CV, Nice to see that you find the NPO useful. Hope you will find a good variation for intraday.

warm regards

Karthik

 

[karthikmarar]

Hi Karthik,

Sorry for hacking this thread or its topic in middle, in general Z score is often refered to or used to estimate profitunity or profitability of a model or system, pls correct me if i am wrong

Z Score for a trading system is calculated by the following formula:

Z=(N*(R-0.5)-P)/((P*(P-N))/(N-1))^(1/2)where:

N - total amount of trades in a series;
R - total amount of series of profitable and losing trades;
P = 2*W*L;
W - total amount of profitable trades in the series;
L - total amount of losing trades in the series.

Hi Amarnath

Nice to see you again on this thread. You are right, The formula given by you is for the Z score of a trading system. Z score can be applied for any data. Here we are applying on the price data to get a Indicator.

Those who are more interested in the z score of a trading system can refer to "The Mathematics of Money Management: Risk Analysis Techniques for Traders" by Ralph Vince.

warm regards

Karthik

 

[ragh_ash]

Hi karthik
can u fine tune the MACD indicator? in recent days gives many whiplashes.
pl
regards

 

[kkseal]

Hi Karthik,

Don't you think the trading rules for the NPO can be extended? Like when it's rising from below -1 and crosses that level. I'm working on a similar indicator (though the underlying premise is different) and from preliminary examination of charts it seems -1 to +1 (when it's rising from below -1) is a good range to trade. But this can only be determined through testing. I'm somewhat lazy when it comes to backtesting (moreover my indi still needs refinements) - so if you can do it for your NPO do post the results.

Regards,
Kalyan.

P.S. The smoothing you've used will introduce a 1.5 bar lag approx, but it's a good one.

 

[kkseal]

One more thing Karthik

From the formula that you're using wouldn't a NPO value of zero correspond to price hitting the 60d MA? (why not use 50 as it's followed more widely). If so then this level itself can be a resistance/support zone (more so if you use 50 instead of 60). So from below -1 (and above 1) cross-up (or cross-down) till zero would be a relatively safe trading zone (subject to test off-course) particularly if the momentum also shows a turn from os/ob zone during the same period.

Regards,
Klayan.

P.S. I could well have misunderstood the NPO construction. So correct me if i'm wrong.

 

[kkseal]

And last but not the least

Congratulations & many Thanks for your great work.

Regards,
Kalyan.

 

[karthikmarar]

Hi Karthik,

Don't you think the trading rules for the NPO can be extended? Like when it's rising from below -1 and crosses that level. I'm working on a similar indicator (though the underlying premise is different) and from preliminary examination of charts it seems -1 to +1 (when it's rising from below -1) is a good range to trade. But this can only be determined through testing. I'm somewhat lazy when it comes to backtesting (moreover my indi still needs refinements) - so if you can do it for your NPO do post the results.

Regards,
Kalyan.

P.S. The smoothing you've used will introduce a 1.5 bar lag approx, but it's a good one.

Hi Kalyan

Values Between 1 and +1 indicates a ranging stock. However it the NPO value crosses 1 and quickly jumps above the +1 it would indicate a strong up trend shaping up. However there is no guarantee as usual. Maybe using some other indicator would help. One has to study that.

Another interesting point if you have noticed is that the NPO normally provides good entry points during pull back and consolidation areas in an up trend. When the NPO drops below +1 and quickly turns back then these are good re-entry points.

I am enclosing a chart just for reference.

One more thing Karthik

From the formula that you're using wouldn't a NPO value of zero correspond to price hitting the 60d MA? (why not use 50 as it's followed more widely). If so then this level itself can be a resistance/support zone (more so if you use 50 instead of 60).

Why not. You can use 50 also. I had put 60 as default as it would approximate a quarter.

And last but not the least

Congratulations & many Thanks for your great work.

Regards,
Kalyan.

Thanks, Kalyan for the kind words of encouragement.

Warm regards
Karthik

 

[karthikmarar]

Hi karthik
can u fine tune the MACD indicator? in recent days gives many whiplashes.
pl
regards

Dear Ragh_ash

The MACD Indicator give lots of whipsaws in two conditions, One during side ways movement of the stock and the other when there is high volatility.

For Dabur which you had mentioned in your PM the MACD gave lot of whipsaws during August when the stock was ranging. Recently again the MACD gave lots of whipsaws because of high volatilty. The Stock started a slow upward move and then saw high voaltilty. However the uptrend is still not negated. It is better to keep out of the stock at such time. The NPO indicator may help you to understand the stock better.

Just enclosing a chart of Dabur for your reference.

warm regards

Karthik

 

[kkseal]

Karthik, there's an oscillator called the Detrended Oscillator which basically measures the distance of price from a MA. You have normalized the same to the StdDev of price (lovely masterstroke!). So i think the NPO can be more aptly called the NDO - Normalized Detrended Oscilator.

But then what's in a name

Regards,
Kalyan.

P.S. Thanks to your work we now have an ob/os level for the DO (Above 1 - turn - cross below 1 - Sell; vice versa for Buy)

 

[ragh_ash]

Hi karthik,
just a amateur question, high volatility means more intra day chances but less delivery based trades?
plus one look for trades(other things being similar) when NPO near zero line?
regards
ps i got the chart color set Black but am unable read the title.