Power assisted Trend Following

[AignerA]

Hello Everyone,

I am new to this forum, i stumbled upon it since a link to my website was posted here. I don't have an account with TD but
i am thinking if anyone is interested they could try out the indicator that i developed. It is pretty simple and borrows
the calculation of 'power' from digital signal processing. It is using Wilder's ATR to give you an indication of how strong a trend is
and whether it will be profitable. I have also combined it with Graham's Growth calculation based on fundamentals together
with a basic trend following strategy yielding Sharpe Ratios in excess of 2.

The article to this can be found here.
There is also another article "The Power of Growth Stocks" getting published in the "Technical Analysis of Stocks & Commodities" magazine July 2020 issue,
so keep an eye out for that also.

Let me know if you have any questions. Thanks!

A.

 

[hoojsn]

Where is the Script for Tos, please share if you have it. Thanks

 

[TrueDepth]

"J. Welles Wilder Jr. After 10 years of losing money he was broke so
he needed to make money fast and wrote this book in the space of 6 months"

How could someone as brilliant as Welles Wilder who created RSI, ADX, pSARand ATR, lose money for 10 years on the stock market!!??? His indicators are very good, obviously. If he couldn't make money....

 

[AignerA]

"J. Welles Wilder Jr. After 10 years of losing money he was broke so
he needed to make money fast and wrote this book in the space of 6 months"

How could someone as brilliant as Welles Wilder who created RSI, ADX, pSARand ATR, lose money for 10 years on the stock market!!??? His indicators are very good, obviously. If he couldn't make money....

He was broke „before“ he wrote this book. He has self published it and makes money on it to this day. Besides he has this company now
https://www.deltasociety.com/So I think he is not doing badly. I think his trend following is really good and quite natural in fact provided you can measure the strength or the trend and determine if it’s a good idea to follow or not.

 

[TrueDepth]

I KNOW, that is the point. He made money from writing the book. Before that he couldn't make money from the stock market to save his life. Now he is selling delta software you say?

If you have an indicator that can actually tell when a market is trending, or going sideways that would be extremely useful. All the ones I have tried from Fractal Energy to ADX with ADX being the best, are terrible compared to eyeballing it.

Do you want someone from this forum to convert your formula into an indicator for ThinkorSwim and see if it works?

 

[AignerA]

I KNOW, that is the point. He made money from writing the book. Before that he couldn't make money from the stock market to save his life. Now he is selling delta software you say?

If you have an indicator that can actually tell when a market is trending, or going sideways that would be extremely useful. All the ones I have tried from Fractal Energy to ADX with ADX being the best, are terrible compared to eyeballing it.

Do you want someone from this forum to convert your formula into an indicator for ThinkorSwim and see if it works?

i also verified his ADX and other indicators for the strength of a trend but found no satisfactory relation. The Noise was just too big to be meaningful but maybe it worked on futures back then who knows ...

If someone wants to try it out and write a script here and let me know what they think yes! I don’t have an account with TD.
I have tested it using about 2300 names over the last 100 days and results look very promising.

 

[TrueDepth]

I think ADX works, not great, but ok. Can you make your indicator simple to understand, like the ADX screenshot below.
If ADX is rising then the stock is moving. If ADX is coming down, then the stock is going sideways/low volatility.

Does your PowerRatioSignal spiking up, predict a big move coming?

 

[AignerA]

@TrueDepth you can check out some example charts here

https://www.reddit.com/r/tradeflags/comments/f77uop

 

[Miket]

Interesting

 

[mashume]

@AignerA

I looked at your paper, and while it looks interesting, there are a few things that aren't clear to me at least.

1. Equation 7 is incorrect. As printed, it is always equal to 1. The textual description is Noise over Threshold, but the equation is printed as the square root of Noise over Noise.
2. I'm unclear as to your actual definition of power -- at least instantaneous power (P sub j). Is it simply 4 * the ATR Stop Loss, or some combination of ATR Stop Loss and current price?

I like the mathematical idea of taking the energy inherent in a move in stock price and trying to see whether the price action is adding more energy or using up energy to maintain a price level, but I'm not sure here. I tried coding it up, and had worked backward through the code until I realised that there was no definition of the instantaneous power given clearly.

If you have code that worked in another platform, R, Python, Matlab even, you're welcome to post it (if it doesn't violate rules) and let us all take a look. There are many good coders around here.

happy trading,
Mashume