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I suggested (and use) to leave the actual “Delta” as is during further calculations, and in order to smooth the end result (the actual line indicator) to use an adaptive MA method, instead of the std. ones.
Ok, got that! Have you ever tried to use an adaptive averager on those CS lines?
Let’s look at a very simple case first, EURNZD (1st pic) starting a nice downtrend around 4:00 GMT last night (I switched to M30, so it should be easy to locate the events in your chart!). Looking at the unsmoothed values, they turn out to be very rugged as expected – this is the upper CS indicator. The lower indicator shows the same analysis, onlyfinally smoothened by a non-adaptive Ehlers Supersmoother of length = 4. The downtrend ending around 11:00 this morning can easily be detected by the two lines crossing, ignoring the ups and downs in between. This is a very simple case of STRENGTH identified by crossing lines.
The 2nd example is not so easy: GBPAUD in the very same time window. Taking the initial impulse at 4:00 a.m. as an entry signal, we’ll have a bearish move to our favour resulting in 20 pips profit within 2 bars. This initial signal is indicated in both versions, with and without final smoothing. The rest of our time window until 11 a.m. is a bit hard to interpret. Here a possible signal for a 2-bar trade is given by ROC.
Now my question re adaptive averaging would be: will it really make a difference? And if yes: what should be the criterion to calculate the variation of the averaging length? For smoothing prices we usually take a variation of price volatility.
So in our case maybe standard deviation of our CS lines could be an option that makes sense mathematically. But with those rugged lines, I doubt that this would lead us to something useful. What would be your choice?
Market Share & Volume: leave it out for the time beeing. I’ll try explaining via Skype session.
Great offer! So I’ll have to reactivate my Skype account …
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A good trader is a realist who wants to grab a chunk from the body of a trend, leaving top- and bottom-fishing to people on an ego trip. (Dr. Alexander Elder)