Wave examples

Piper asked for a 89 SMA on the charts. Here it is. A 60min and 5min crude oil chart...

Wave oscillator

I promised a follow-up on my article Wave within Waves. It seems the idea has merits. The one question not answered was: How many different timeframes should I implement to get a reliable reading. My first implementation used 3 different settings, as these were the oscillators I always had on screen. I now expanded that to 10 different settings based on the Fibonacci number series and added a second independent oscillator, which I setup the same way.

This is what I got (crude oil July 09 60min):

and here is a crude oil July 09, 5min chart

Even if both oscillators forming my new Wave oscillator are independent from one another, both are scaled to use a mid-line and the scale seen on the indicator is fixed, so crosses of the lines are not just arbitrary due to screen resolution or chart size.

I'm now looking working with the assumption, that readings above the mid-line represent uptrends, readings below represent an underlying downtrend.

Color-changes at extremes might signal a trendchange.

Color-changes near the mid-line might represent an entry opportunities with the trend.

Crosses of the oscillators might confirm the color change signals.

Divergence of the blue line against price near extremes may support a trendchange signal signaling exhaustion of the previous selling or buying momentum as prices are running into support or resistance levels.

I will have this setup on screen for a while to see, if these assumptions are correct. If yes, I will try to implement an ATS, which should impartially tell me wether these assumptions are correct or not. I won't do that in the first place, as an ATS requires very strict rules. And there is a tendency to tweak an ATS until it produces the desired results. First I need to get a feeling for the setup, I need to understand, if this setup produces good signals or not. Then I can start looking to implement the rules into a mechanical ATS.

Waves within Waves

Looking into a new (old) concept. Waves within waves. Why do we sometimes see springfloods, why do we sometimes have big violent moves in the market place, while seemingly similar circumstances at other times give us just a ripple with no food to gain?

Can you predict the height of any single wave in the ocean? If you knew the height of any wave in the ocean at one point in space and time and you add them all together, then you could. Or you just measure the height by placing a ruler into the water until it hits the ground. Now you can be fairly sure, that any trough you measure will be followed by a high. And the lower we go, the higher the next wave(s) will be.

Kinda' interesting, don't you think, if you assume, that the marketplace moves in waves as well.

The indicators we usually use, measure one wave. Yes one single wave in a specific timeframe. They simply ignore the remainder of the universe. But to measure the depth of the ocean, it doesn't suffice to measure one wave. Actually you just can't measure the height of one single wave. That wave is the sum of all waves making that specific wave up.

I had on my previous charts 3 stochastic %D lines (81,3, 27,3 and 5,3). The one indicator you see above is the sum of these 3 lines calculated as (%D(81,3) + %D(27,3) +%D(5,3))/3. The lowest reading lead to the best move for the day so far.

I will put this new indicator on my charts and watch it. I will experiment with it by adding other timeframes to see, how the information changes.

Maybe this makeup for an oscillator is an answer to the one flaw any oscillator has: It works excellent in ranging markets, but once a trend exceeds the length of the oscillator, they suck big time.

New Articles

Hi Newton,

thanks for your encouragement. I'm sure I will write more often again, but right now I'm reading not writing. I'm reading "The Daily Trading Coach" from Brett Steenbarger. A book I can only recommend. A small, very small part is from me as well, as I participated in chapter 9 by writing Lesson 82.

The book is really good and for now I'm taking my time to get it's lessons in my head.

But be sure, I will post new ideas again in the future...