Usage Notes for RSI Laguerre Indicator with Fractal Energy

markos

markos

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This short tutorial is an example of how to use the indicator shown near the bottom of the Trend Reversals Indicator with Signals Thread. The RSI Lagueere and FE (called CHOP in the example) are separated so that their action can be seen easier.

Latest (July, 2019) Version for TOS: RSI Laguerre Auto-Adjusted with Fractal Energy algorithm http://tos.mx/LldzdS
Code and Notes in next comment below .,..

Further toward the bottom are even more usage notes.




Further toward the bottom are usage notes from "Master Yoda" himself!
 
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markos

markos

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Chart: http://tos.mx/LldzdS

Usage Notes
Notes from zztop:

DISCLAIMER: Mobius mentioned that it was not his habit to give trading advice or even advice on how to use indicators. However, there's been such a proliferation of bad, inaccurate, false info regarding so many of them recently he felt compelled to give some accurate information.

Mobius©: I use a very simple method – RSI Laguerre and Fractal Energy on a list of very liquid stocks. I look for polarity change and trade when both RSI and FE are in “confluence”. If volatility is high enough I sell spreads if not I buy them. Other than hedging (which I do a lot of) that's it.
I like it simple.

The typical base setting I like to use for the FE is a length of 8. If I'm trading options I like to look at it about the length of time I'm buying or selling the option for. I want to know if it's reverting and where the energy is so I'll use a longer length for reversion and a shorter length to see if energy is building or waning.

If RSI Laguerre is descending and FE over .6, that tells me something is changing and I'm already looking at an equity I've determined is about to make a polarity change. So the worse case that happens is that the security grinds sideways for a few days.

A reading of the FE over .6 is an indication that energy has been built up. If the FE is high (over .6) and RSI LaGuerre is breaking lower FE will follow suit. If RSI reverses and goes above .8 I'm outa there, with the assumption I have a short position.

FE is a gauge of both mean reverting and linearity. Descending readings indicate a trend is on. A reading below .3 indicates exhaustion in trend or near exhaustion. A reading above .6 indicates moving sideways with rapid reversion and energy building for a move again.

Above .6 - Think price compression or squeeze
Below .3 - Think running out of gas

Here's an example:

FE at 60 periods is oscillating around .5 tightly while FE at 8 periods is over .6. Zscore is over 2 and is starting to roll over. That is a good short to the mean.

Short trade setup I look for with RSI Laguerre adjusted with FE:
1) Polarity Change - Equity has gone from making higher highs and higher lows to making a lower high and lower low and is now putting in another lower high
2) RSI Laguerre is above .8 and descending from 1
3) Fractal Energy is below .38 and nose down or above .6 and rolling over. In the first case, below .38, FE is indicating trend exahustion and RSI is likely showing as a peak and not running across pegged at 1. In the second case price has risen to a lower resistance and has been rolling slowly over building energy.

Mobius RSI LaGuerre with Fractal Indicator:
Code:
# RSI-Laguerre Self Adjusting With Fractal Energy Gaussian Price Filter  # Mobius  # V01.12.2016
# Both Fractal Energy and RSI are plotted. RSI in cyan and FE in yellow. Look for trend exhaustion in the FE and a reversal of RSI or Price compression in FE and an RSI reversal.
# Rename Study to RSILg_FE_Gssn1 for compatability with Scanning

declare lower;

#Inputs:
input nFE = 8;#hint nFE: length for Fractal Energy calculation.
input AlertOn = no;
input Glength  = 13;
input betaDev =  8;
input data = close;

def w = (2 * Double.Pi / Glength);
def beta = (1 - Cos(w)) / (Power(1.414, 2.0 / betaDev) - 1 );
def alpha = (-beta + Sqrt(beta * beta + 2 * beta));
def Go = Power(alpha, 4) * open +
             4 * (1 – alpha) * Go[1] – 6 * Power( 1 - alpha, 2 ) * Go[2] +
             4 * Power( 1 - alpha, 3 ) * Go[3] - Power( 1 - alpha, 4 ) * Go[4];
def Gh = Power(alpha, 4) * high +
             4 * (1 – alpha) * Gh[1] – 6 * Power( 1 - alpha, 2 ) * Gh[2] +
             4 * Power( 1 - alpha, 3 ) * Gh[3] - Power( 1 - alpha, 4 ) * Gh[4];
def Gl = Power(alpha, 4) * low +
             4 * (1 – alpha) * Gl[1] – 6 * Power( 1 - alpha, 2 ) * Gl[2] +
             4 * Power( 1 - alpha, 3 ) * Gl[3] - Power( 1 - alpha, 4 ) * Gl[4];
def Gc = Power(alpha, 4) * data +
             4 * (1 – alpha) * Gc[1] – 6 * Power( 1 - alpha, 2 ) * Gc[2] +
             4 * Power( 1 - alpha, 3 ) * Gc[3] - Power( 1 - alpha, 4 ) * Gc[4];
# Variables:
def o;
def h;
def l;
def c;
def CU1;
def CU2;
def CU;
def CD1;
def CD2;
def CD;
def L0;
def L1;
def L2;
def L3;
plot RSI;
plot OS;
plot OB;
plot M;

# Calculations
o = (Go + Gc[1]) / 2;
h = Max(Gh, Gc[1]);
l = Min(Gl, Gc[1]);
c = (o + h + l + Gc) / 4;
plot gamma = Log(Sum((Max(Gh, Gc[1]) - Min(Gl, Gc[1])), nFE) /
        (Highest(gh, nFE) - Lowest(Gl, nFE)))
            / Log(nFE);
gamma.SetDefaultColor(Color.Yellow);
L0 = (1 – gamma) * Gc + gamma * L0[1];
L1 = -gamma * L0 + L0[1] + gamma * L1[1];
L2 = -gamma * L1 + L1[1] + gamma * L2[1];
L3 = -gamma * L2 + L2[1] + gamma * L3[1];
if L0 >= L1
then {
    CU1 = L0 - L1;
    CD1 = 0;
} else {
    CD1 = L1 - L0;
    CU1 = 0;
}
if L1 >= L2
then {
    CU2 = CU1 + L1 - L2;
    CD2 = CD1;
} else {
    CD2 = CD1 + L2 - L1;
    CU2 = CU1;
}
if L2 >= L3
then {
    CU = CU2 + L2 - L3;
    CD = CD2;
} else {
    CU = CU2;
    CD = CD2 + L3 - L2;
}

RSI = if CU + CD <> 0 then CU / (CU + CD) else 0;
RSI.SetDefaultColor(Color.Cyan);
OS = if IsNaN(c) then Double.NaN else 0.2;
OS.SetDefaultColor(Color.RED);
OS.HideBubble();
OS.HideTitle();
OB = if IsNaN(c) then Double.NaN else 0.8;
OB.SetDefaultColor(Color.GREEN);
OB.HideBubble();
OB.HideTitle();
M = if IsNaN(c) then Double.NaN else 0.5;
M.SetStyle(Curve.long_dash);
M.SetDefaultColor(Color.Gray);
M.HideBubble();
M.HideTitle();
plot FEh = if isNaN(c) then double.nan else .618;
FEh.SetStyle(Curve.short_DASH);
FEh.HideBubble();
FEh.SetDefaultColor(Color.GRAY);
FEh.HideTitle();
plot FEl = if isNaN(c) then double.nan else .382;
FEl.SetStyle(Curve.short_DASH);
FEl.SetDefaultColor(Color.GRAY);
FEl.HideBubble();
FEl.HideTitle();
AddCloud(0, OS, Color.RED, Color.RED);
AddCloud(OB, 1, Color.Green, Color.Green);
Alert(AlertOn and RSI crosses below .8, "", Alert.BAR, Sound.Bell);
Alert(AlertOn and RSI crosses above .2, "", Alert.BAR, Sound.Bell);

# End Code RSI_Laguerre Self Adjusting with Fractal Energy
 
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