ta01 wilmott.com When BB > Upper band and RSI > 70,Sell signal:

http://www.wilmott.com/messageview.cfm?catid=38&threadid=83988

Hello All, I am generting signals with Bollinger bands and RSI. Sell Signal: When BB > Upper band and RSI > 70 exit Sell signal: when BB < Mean and RSI < 40 Buy Signal: when BB < Lower Band and RSI < 30 Exit buy signal: When BB > mean and RSI > 60 But this happen to be good in rangining market but incur losses in the trending market with this combination. Look First Graph in http://www.trading-naked.com/Divergence.htm In the given link, at 4.37 we saw divergence and the price come down after that. At 4.32 we would have draw trend line joining high point at 4.23 and high at 4.32. Even this could gave us divergence but price rises after that. At 4.32 how would have we knew that price would rises or falls? How to use divergence really in algorithmic trading? Help would be appriciated. http://www.trading-naked.com/Divergence.htm Edited: Mon May 02, 11 at 02:39 PM by humtumiit

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edouard Senior Member Posts: 1127 Joined: Feb 2010	Sat Apr 30, 11 11:40 AM Quote In the attached file did you actually attach a file ? ------------------------- quant corner
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humtumiit Member Posts: 140 Joined: Apr 2007	Mon May 02, 11 02:39 PM I am sorry. I mean in the given link.
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humtumiit Member Posts: 140 Joined: Apr 2007	Thu May 05, 11 08:29 AM Does anyone has an idea? How to club Bollinger band with RSI in trended market?
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Stew Junior Member Posts: 20 Joined: Jan 2011

Thu May 05, 11 10:01 AM Most research suggests that indicators such as Bollinger Bands and RSI are only mildly predictive at best. Usually any predictive benefit is of similar size to the trading costs. That has also been my experience but I'm quite happy to be wrong Usually textbooks would suggest using a shorter length RSI in a trending market to capture the smaller cycles as it is rising or falling. You could use Bollinger Bands to highlight the beginning and end of the trend. Except for very strong trends, a bar won't breach the bands until near conclusion or reversal of the trend. For what it is worth, I often use these type of indicators as inputs to more powerful algorithms. In terms of predictiveness, be sure to examine RSI[2] - my algorithms tend to choose this frequently. Hope that helps.

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humtumiit Member Posts: 140 Joined: Apr 2007

Fri May 06, 11 09:55 AM That's Right, Even in my backtesting with Bollinger bands and RSI, the Rate of return is very less that is being used for paying transaction costs or strategy is making losses. It is not even working with smaller RSI lag i.e. RSI(data,2). In ranging market, it works fine and every trade gives decent rate of return. But one or two bad trades during trending phase eats out all the profit. Is there any indicator or way out to predict the strating or end of the trend? Is there any indicators which can be used solely or in combination with RSI and Bollinger band such that I can avert the loss making trades which eat out all the profit? What are the indicators would you prescribe me to use for algorithmic trading? Edited: Fri May 06, 11 at 10:18 AM by humtumiit

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Stew Junior Member Posts: 20 Joined: Jan 2011

Mon May 09, 11 04:26 PM Ok - 1) Get to learn and use the main technical indicators as they are intended in texts. These may be useful for pre-processing data in the future. 2) Get to understand volume trends and L2 dealbook patterns. 3) Then start looking at intermarket relationships, eg USD/CAD vs WTI. 4) Start researching data mining techniques such as nearest neighbour, neural networks etc. Hope that helps, Stewart

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edouard Senior Member Posts: 1127 Joined: Feb 2010	Tue May 17, 11 12:50 PM Quote 4) Start researching data mining techniques such as nearest neighbour, neural networks etc hello Stew. do you know any valuable study linking together TA indicators and data mining ? thank you. ------------------------- quant corner
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Stew Junior Member Posts: 20 Joined: Jan 2011	Tue May 17, 11 04:35 PM Sadly not. It's a bit of a slog and quite mathematical. There is a tool named Neuroshell Trader which automates a one flavour of this, but you still need to configure it which once again is a bit of a dark art. www.neuroshell.com
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edouard Senior Member Posts: 1127 Joined: Feb 2010

Tue May 17, 11 10:10 PM Quote Originally posted by: Stew Sadly not. It's a bit of a slog and quite mathematical. There is a tool named Neuroshell Trader which automates a one flavour of this, but you still need to configure it which once again is a bit of a dark art. www.neuroshell.com and, do you yourself use data mining ? can you provide some hints on how to start searching along ? thank you. ------------------------- quant corner