Average Penetration Filter
-
I spotted this idea in a magazine someone kindly sent me today (thanks!) and I thought it was interesting. Basically it is a sum of the number of times in a look back period that a close penetrates below an average line.
In the article the author is suggests using an average of 100 and a look back time period of 3 months – but for some reason chooses a value of 63 to represent this. He suggests that a value below 7 indicates bullishness but when I created an indicator it seemed better to say that if the returned value is falling or flat lining at zero then it is a bull market and if it starts rising then it is time to not be on the market.
The code for the indicator is very simple:
LBPeriod = 63 AvePeriod = 100 ClosePenLow = Summation[LBPeriod](close < Average[AvePeriod]) Return ClosePenLowI decided that it would be interesting to see how many times the high is above and the low is below during the look back period and so this is the code for that: I feel that this is possibly a better indicator.
LBPeriod = 63 AvePeriod = 100 LowPen = summation[LBPeriod](low < Average[AvePeriod]) HighPen = summation[LBPeriod](high > Average[AvePeriod]) return LowPen coloured(128,0,0), HighPen coloured(0,128,0)[attachment file=73379]
It is meant to be applied to daily charts but I found that as an overall trend filter on weekly charts it worked pretty well so that is what I have shown here.
Obviously the indicator code can be easily adapted to be used in a strategy as a filter.
As usual – any thoughts, ideas and improvements are welcome…..
I decided to turn the high and low average penetration filter into a histogram so as to more quickly see what it is telling us without having to analyse the lines.
If green line is above red line but gap is reducing then it switches to bearish and if red line is above green line but gap is reducing then it switches to bullish. Otherwise green above red = bullish and red above green = bearish
Here is the code:
LBPeriod = 63 AvePeriod = 100 LowPen = summation[LBPeriod](low < Average[AvePeriod]) HighPen = summation[LBPeriod](high > Average[AvePeriod]) IF HighPen > LowPen then Flag = 2 endif IF HighPen < LowPen then Flag = -2 endif If flag = 2 and Highpen - LowPen < HighPen[1] - LowPen[1] then Flag = -2 endif IF flag = -2 and LowPen - HighPen < LowPen[1] - HighPen[1] then Flag = 2 endif If flag > 0 then R = 0 G = 128 else R = 128 G = 0 endif return Flag coloured(R,G,0) style(Histogram,2) as "Average Penetration"[attachment file=73389]
Pepsmile thanked this post
- You must be logged in to reply to this topic.
Summary
This topic contains 9 replies,
has 4 voices, and was last updated by 
5 years, 7 months ago.
Topic Details
| Forum: | General Trading: Market Analysis & Manual Trading |
| Language: | English |
| Started: | 06/15/2018 |
| Status: | Active |
| Attachments: | 2 files |
