all washed out today, page-8

Hi Spartz

The exits are a home brew indicator I put together as more of a guide to the risk it is going to fall after this point.

Basically it looks for how wide the bollinger bands are over 5 days and compares them to the bollinger bands over 10 days to find out if prices are compressing - and assumes that if prices are compressing and hanging around the lower side of the bollinger band the probability is that the next move will be up - and vice versa if they are compressing and on the upper side the odds are the next move will be down.

Anyway as a rule of thumb - looking at historical data - I came up with a "rule" that when the price compression crosses 1.5 (price range have narrowed by a third ) to the upside then there is a good chance that prices have bottomed and will rise

On the other hand if the price compression crosses above -1.5 to the upside means that not only is there a probability of a downward move - but that a downward move is underway because the trading range is now broadening.

The grey indicator second from the bottom is the compression

It isn't perfect - more of a red light on the dashboard - in a trending market - like RAU at the moment it comes unstuck because it assumes that if on the bottom bollinger band the next move will be to the top - that is prices tend to bounce around between the upper and lower - but when they trend they stick to one side and the indicator fails - so it is a use with other things type of tool - not a stand alone.


Oh yes to post charts save as an image and post to a site like http://allyoucanupload.webshots.com/ and use the
< img src="link to image here" /> in your post

you can test the html here to see if it works

http://www.fuzzylu.com/docs/html/js/home.htm


For the madmen - the metastock formula is below.

ST:=5;{Short term days}
LT:=10;{Long term days}
BTP:=C;{The price I am using}

BBT:=Abs(Mov(BBandTop(C,ST,S,2)-BTP,ST,S));
{BBT = difference between current price and Bollinger Band Top}

BBB:=Abs(Mov(BTP-BBandBot(C,ST,S,2),ST,S));
{BBT = difference between current price and Bollinger Band Bottom}

Sign:=If(BBB>BBT,-1,If(BBB{work out if we are closer to the top or bottom and come up with a sign to indicate the direction of the next move}

LTC:=(BBandTop(C,LT,S,2)-BBandBot(C,LT,S,2));
{Long Term Compression}

STC:=(BBandTop(C,ST,S,2)-BBandBot(C,ST,S,2));
{Short Term Compression}

STC:=If(STC=0,1,STC); {avoid divide by Zero}

Mov(Sign*LTC/STC,ST,S);
{smooth out the long term ratio to the short term with a short term moving average and assign a direction to it}