Looking for Oscillator That Does NOT Diverge

[Guest Tresor]

Hello Guys,

 

One stupid question from a newbie. Is any chance there is an oscillator that does not diverge at all (or diverges very little)? I need it for calculating Bollinger Bands of it.

 

Regards

[BlowFish 10]

Dunno, you would have to eliminate phase shift (lag) before you could meaningfully measure divergence in amplitude. I would take a look at signal processing approaches, Ehlers work springs to mind. I think the short answer is probably no - unless you know precisely the phase shift so can compare the amplitude of price now with the oscillator amplitude N (lag) bars ago. I think that might work but might not useful My knowledge of signal processing is pretty rudimentary though if memory serves there are a couple of guys here that where engineers in previous lives that might be able to answer with much more authority.

[Kiwi 16]

An oscillator diverges for a simple reason (well its simple for a good oscillator).

 

When price doesn't have as much velocity (measure vertical move/number of bars) then an oscillator will not push as far as price because in some way its a 1st (or maybe 2nd in come cases) derivative of price.

 

So by definition oscillators will diverge.

 

Will divergence be meaningful? Quite probably not ... slowing down doesn't mean that something is going to stop and reverse does it?

[Guest Tresor]

For a project of mine I just need the oscillator that resembles the price as much as possible, e.i. if the price makes a new high, I want the oscillator to make a new high as well.

 

What you guys wrote is not very optimistic for me :hmmmm:

[Kiwi 16]

Why not just double smooth price then. Try a 3 ema followed by a 3 ema of the 3 ema (or sma for that matter). Or a hull ema. That will look like price.

 

Or if you want the extensions use a zig zag or a zig zag smoothed with a 3ema.

[bigdavediode 10]

For a project of mine I just need the oscillator that resembles the price as much as possible, e.i. if the price makes a new high, I want the oscillator to make a new high as well.

 

What you guys wrote is not very optimistic for me :hmmmm:

 

Perhaps a inverse Fourier transform. You could create a low (or high) pass filter to chart with other indicators or just map the "function" very closely.

[Kiwi 16]

Heres a zig zag then a hull(4) of the zz and then a hull(6) of the hull(4) (green)

[Guest Tresor]

Why not just double smooth price then. Try a 3 ema followed by a 3 ema of the 3 ema (or sma for that matter). Or a hull ema. That will look like price.

 

Or if you want the extensions use a zig zag or a zig zag smoothed with a 3ema.

 

Hi Kiwi, emas will be emas; they can móve from 0 to zillions. I need an oscillator that will be bound within -100 to 100 or 0 to 100, etc

[BlowFish 10]

A bound oscillator will always diverge at times due to the normalisation. Price is unbound.

[Guest Tresor]

Hello BlowFish,

 

It seems the mathematical rules cannot be broken.

 

Regards

[BlowFish 10]

What exactly are you trying to do? Maybe there is another way of approaching things.

[zdo 20]

Polarized Fractal Efficiency (PFE) on ‘momentum’ indicators will not diverge as much since they tend to slam to the top or bottom and stay there until time to slam back to other side

 

hth

 

zdo

[Guest Tresor]

zdo,

 

I will look into PFE

[BlowFish 10]

Polarized Fractal Efficiency (PFE) on ‘momentum’ indicators will not diverge as much since they tend to slam to the top or bottom and stay there until time to slam back to other side

 

hth

 

zdo

 

Wont they diverge more? as when they are pegged high or low price can make new extremes but they can not?

[zdo 20]

Blowfish,

 

Yes ( But as was covered on the first page, mathematically we are 'grasping at straws' (whatever that means ) with the bounded range of the indicator requirement. )

 

and No ...

 

..just trying to help...

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bump: Tresor,

 

Have you looked at slow ergodic(s) or stochasticCG for your purposes?

 

zdo

[BlowFish 10]

We are all trying to help, I was just trying to understand how PFE might accomplish that? No need to swear at me for being slow.

 

I guess not understanding what Tresor is trying to accomplish (apart from getting a square peg in a round hole) does not help. Actually more like getting an infinite peg into a finite hole.

[Guest Tresor]

Guys,

 

please do not be angry with me for my being late with repsonses. Today is my first day of demo trading US markets. I am trying to master the DOM and other stuff. Will reply in a greater detail today or tomorrow.

 

Cheers

 

P.S. Till now very profitable

[zdo 20]

As others have noted in earlier posts, due to the nature of bound oscillators for them not to get pasted to an edge or diverge, they must be truly predictive of how far this swing will go and adaptively increase the length ‘just right’ to hold it back from cascading across the middle to the other side for the first swing and then adaptively / differently manage the length of the second swing to allow it to run closer to the edge than the oscillator did the last swing. That’s more than fitting shapes into shape holes – that’s magic.

Basically, at first use ‘stochastics’ type indicators to indicate when an instrument is ‘stochastickin’ and when it’s not. It’s just as important to know when to use them as it is to know how to use them. Realize that the same pattern on an oscillator can represent a huge variety of patterns up on the price chart and if one were viewing the oscillator in isolation it would be possible to narrow down to a promising set of likely price patterns occurring on the hidden chart the but impossible to say which one it is. If you are going to master ‘stochastic’ type indicators, learn how the price representation and the indicator representations work together for you – including + and – divergences, etc. Then, get to where smooth sucks. Learn to prefer fast, ragged, jagged, and jittery. (ie If you’re looking for smooth security, consider getting a job instead of trading leveraged instruments )

...It's easy to see why a lot of trading minds reject oscillators out of hand.

 

re “For a project of mine I just need the oscillator that resembles the price as much as possible, e.i. if the price makes a new high, I want the oscillator to make a new high as well…What you guys wrote is not very optimistic for me” No, in general we can not be very optimistic on this. All the suggestions I made were just off the top of my head. Here is another. Run your oscillators beside a detrend instead of a price chart. See Blowfish’s #9 post. If anything else pops into my head will let you know - at least you've been warned.

 

“I need it for calculating Bollinger Bands of it.” Suggestion – on indicators, try Keltners instead of BB’s.

 

Find attached a weekly YM chart with StochasicCG. It tends to diverge less often. White trend lines show place where it did not diverge. Red trend line shows place where it did.

Again- it only diverges slightly less often! There are still divergences all over the place

 

hth

All the best,

 

zdo

[BlowFish 10]

Ahh, I think we might be using a different vocabulary here. Often the case Generally speaking when people use of the term divergence is in respect to amplitude. Price makes a higher high but the oscillator fails to. There is a whole range of techniques based on this phenomenon.

 

I might be wrong but I think what you have there zdo is an oscillator with what I would call low phase shift or lag (which is a valuable thing in itself). However as the oscillator is 'pegging' high or low it is diverging (in amplitude) on nearly every swing. Of course it would trying to fit an infinite (unbound price) thing into a finite (bound oscillator) hole. You might manage to do it if you rescaled the oscillator every time price made a new high or low, not sure how useful that would be as old 'signals' would disappear and appear as new price series data arrived.

 

Edit: just noticed "Learn to prefer fast, ragged, jagged, and jittery." on a re-read. Better still learn to prefer price :)

[Guest Tresor]

Hello Guys,

 

Thank you very much for your contribution. I appreciate both good-faith input and sarcastic one. Recently a very skillfull programmer coded an AE for me that I had for some time in my head in pursuit to automate some of my activities. The backtesting and forward testing on multiple year data proven that this system is profitable and very robust for the third world markets I trade.

 

I attach a screenshot. Do not look at signals (these were not optimized for ES). In the bottom there is an indicator (hidden as it is proprietary) being a part of this EA. It is quite complex, at least for a programming newbie like me. I had to occupy my old almamater's supercomputer to optimize this strat. Simple work stations and servers would die Zillions of combinations.

 

This EA shows bad signals from time to time because of one oscillator's on which BB are calculated is showing divergence in relation to price.

 

I was naively thinking there might be some kind of solution to make an oscillator divergence-resistant so that I could make some suggestion to the programmer so that he could investigate further.

 

That's the whole story.

 

Regards

 

Bump:

 

“I need it for calculating Bollinger Bands of it.” Suggestion – on indicators, try Keltners instead of BB’s.

 

 

zdo

 

Keltners already included

[zdo 20]

Blowfish,

 

re: “definitions”. I become more grateful each day at the freaked out definitions and perception patterns I have in trading… but I wouldn’t wish them on others. Again, I was only trying to help Tresor a little bit in his explorations… just some things off the top of my head to shorten the search and facilitate him bringing it to resolution in his own way. I have absolutely no argument with the preciseness of your definitions of divergence, etc.

btw I suspect all of us are projecting big time – he has only hinted at what he’s really after and we are imagining from there

 

re “what you have there zdo is an oscillator with what I would call low phase shift or lag”

That’s amusing – cause when I saw it, my first thought was “way too much lag”

 

re: “Better still learn to prefer price” Again, no real argument. Like I said - it’s easy to see why a lot of trading minds reject oscillators period… on the other hand, price also is just a representation of the auctions and to make it the ‘only thing that matters’ is ultimately limiting…

 

Have a good one.

 

zdo

[januson 10]

Tresor-> What indicator wouldn't be profitable after optimizing? IMHO as soon as an indicator needs optimizing to give proper indications, then the life span of the indicator would turn out to be very short and the worst part, one can allways use an excuse for the incoming failure

 

An optimal indicator would consist of more than just simple OHLC calculations, but should take previous action into consideration and thereby be build as dynamic as possible, hence adaptive indicators rules and optimization should be superfluous.

 

But again.. it's just me :missy:

 

 

BTW: Just remove the name of the indicator, I'm sure no one can figure out the name it's a lot easier to share when everybody share

[Guest Tresor]

Parts of this study are dynamic / self-adjusting

[januson 10]

Parts of this study are dynamic / self-adjusting

 

But it still needs optimization? And that's exactly the point where the system fails :doh:

 

Forget about optimization, curvefitting etc. Create a system that looks at different scenarios, weights them and then take the most accurates one at that particular moment in time

[sevensa 10]

Forget about optimization, curvefitting etc. Create a system that looks at different scenarios, weights them and then take the most accurates one at that particular moment in time

 

How is that different than optimization?