indicators on indicators. -...
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TR�DINGTIPS. Issue
08
Simple steps to advanced analysis.
INDICATORSON INDICATORS.
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Philipp is the Senior Quant Analyst at Intalus. He was born in Austria
and studied electrical engineering before joining a large German bank
where he developed fully automated trading strategies for the
proprietary trading department. His book about designing successful
trading strategies has been among the top sellers in Germany for the
last two years. Currently at Intalus, he is responsible for the in-house
training of institutional traders and the development of custom-made
algorithmic trading strategies.
You may contact Philipp at
INDICATORSON INDICATORS.
by Philipp Kahler
TR�DING TIPS. Issue 08INDICATORS ON INDICATORS.
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INDICATORS ON INDICATORS.Simple steps to advanced analysis.
Tradesignal provides almost 200 build-in technical indicators.
Therefore, it is not always easy to find the right one – tailored
specifically for your needs. However, it is quite easy to build your own
custom indicator if you know exactly what and when you
would like to see on your charts. As an example, I came up with the
following investment idea: Buy if there has been a small correction in
an uptrend – and show how to implement it within Tradesignal.
You can define “correction within uptrend” combining all two indica-
tors. The Directional Movement Index could give you the trend
direction, the Stochastic Indicator might show you the correction.
However, you might not always like the complex calculation of the
Directional Movement Index. The number of alerts generated by
simple Slow Stochastic can be very annoying – always either
overbought or oversold, providing no stable signal. Instead, you would
like to see a smooth, simple indicator which catches the perfect
retracement in any uptrend.
I will alter my strategy to get the desired result and use the oldest
indicator around – the 200-day Simple Moving Average. I simply drag
and drop a “Moving Average Simple” indicator onto my chart and set
it to a period of 200 days. This indicator, as old-fashioned as it might
be, is great for trading stocks. Everyone knows that it is advisable to
buy stocks if they trade above the 200-day line.
Hence, market trading above the 200-day line combined with rising
200-day line is a good indicator of the bullish trend. First task is
completed.
Our next challenge is to find useful indicator to show market dips.
I would like to use the Momentum indicator. It compares today’s price
with the one 10 days ago – simple and easy. Market builds up
momentum if the Momentum indicator is rising.
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Now put the Momentum indicator onto your chart and see for
yourself. It is easy to determine momentum status above and below
zero, but it is hard to determine if the momentum is rising or falling
with all that daily fuzz. This is visualized by the confusion of my arrows
in Fig 1.
And now it is time for magic. Instead of keeping the Momentum
applied to the symbol in the chart, drag and drop it onto the 200-day
line! This gives you a very smooth Momentum indicator and you can
easily see if the indicator is rising or falling.
Watch video to see how you can
do this in Tradesignal®.
TR�DING TIPS. Issue 08INDICATORS ON INDICATORS.
Fig. 1: Plain Momentum Indicator in the lower pane doesn’t offer sufficient information.
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Let’s have a closer look. Search for all the days when the market is
trading above the 200-day line and your custom Momentum indictor
starts to rise. You should have been able to make positive profits on
the long side from such analysis.
On the other hand, the right time to close your position or to use a
tight stop would be when the market trades above its 200-day line
and your custom Momentum indicator starts to fall.
At least a small correction should be expected. You can save this
indicator combination in the template section of Tradesignal’s toolbox
– simply Save Template.
Take care, take profit,
Philipp Kahler
Senior Quantitative Analyst at Intalus
TR�DING TIPS. Issue 08INDICATORS ON INDICATORS.
Fig. 2: Momentum applied to Moving Average. Now turning points can easily been identified.
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© 2013 Intalus – www.intalus.com
Distribution allowed under a Creative Commons Attribution-Noncommercial license:
http://creativecommons.org/licenses/by-nc/3.0/
Tradesignal® is a registered trademark of Tradesignal GmbH.
Unauthorized use or misuse is specifically prohibited.
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HIGHLY EFFICIENT
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RULE-BASED TRENDLINES.
How to use point & figure trend lines
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TR�DINGTIPS. Issue
01 SCAN FOR CANDLE PATTERNS.
How to find best performing
stocks and the best risk/reward
opportunities by identifying
promising candlestick patterns.A publication of
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How to find the best risk/ reward opportunities based on candlestick patterns.
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SCAN FOR CANDLE PATTERNS.
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How to create your own equity basket.
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SPEED UP YOURDECISIONS.
TR�DINGTIPS. Issue
02
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How to create and trade an optimal portfolio.
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CONTROL YOUR RISK.AUTO-ADJUST POSITION SIZE.
TR�DINGTIPS. Issue
03
A publication of
How to identify and profit well from a short trade.
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HIGHLYEFFICIENTSHORTING.
TR�DINGTIPS. Issue
04
A publication of
How to use point & figure trend lines in candlestick charts.
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RULE-BASEDTRENDLINES IMPROVEDISCIPLINE.
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05
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A simple, but effective strategy.
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TR�DING TIPS. Issue 08INDICATORS ON INDICATORS.
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