Friday, May 15, 2009

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.