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Post From: Offering To The Community: Forex: Currency Decorrelation (and Currency Strength)

[2018-12-17 10:02:15] Link To Thread - Link To Post [Go To First Post]
bjohnson777 (Brett Johnson) - Posts: 284
My health problems have given me a really bad weekend, but I think I've got a general idea about what you're talking about. Since I'm a C++ programmer, I've never bothered to learn the spreadsheet side of SC, so my responses will be more from the programming side. This kinda sounds like an indirect measurement of the primary line from all the secondaries creating a forward looking indicator. Instead of summing all the down slopes, a percentage would probably be better. A percentage won't care about about flat and up because it handles everything at once. Math: Percent = Down / (Up + Down + Flat) Simplified a little more, Percent = DownCount / TotalCount This will give a range between 0.0 to 1.0, where 0.0 is 0% (all secondary lines are going up, very weak primary) and 1.0 is 100% (all secondary lines are going down, very strong primary). The weakness in this is not accounting for distance each secondary line has travelled in the up or down direction. That accounts for some of the noise and strong smoothing requied to clean it up. If all the secondary lines blip up for a single bar, that would send the primary indicator to 0%. Your comment about counting the last few closes would kinda add the missing distance calculation. Maybe each secondary line gets a percentage calculation like the one above and for the final primary indicator, all those secondary percentages get averaged together. The weakness in this is the bar back count. Count enough back and most of the lines would be wiggling around 50% instead of making larger moves. Maybe 10 bars back would be the max. There's also a possiblity of skipping percents and going for pip movements since all my price lines are proportionally scaled to each other. In that case it would be counting pips up and down for all the secondary lines. Weakness: technically a percentage would be cleaner from the math purist perspective. That way scaling is always relative to some kind of percentage point count. Something to look out for: Getting too much math in this might just recreate the primary line, which doesn't work so well for a forward looking indicator. This is a kind of over engineering gotcha. Another thing to experiment with would be putting RSI's on each of the secondary currencies and averaging those together for the primary indicator line. In testing, compare that to an RSI against the primary indicator line to see if something stands out and really makes a difference. Adding more currencies into the calculation really won't do too much more beyond the standard 7 since that's what everyone else uses. If you're trading some of the lesser currencies, then yes, it would be needed. For the time being, keep things simple with the major 7. Keep playing with all this. When I was experimenting with the new indicators in my tool kit, I would watch them for weeks to see how they responded. There were many failures that I would just dump... and sometimes I would do a total gut and rewrite into something new before I found something I was happy with. The process starts out with something that looks good for historical data. Next it's taken into some kind of live trading (paper or actual money) to see how well it responds and indicates for real time. If real time starts giving good trading signals, then it's close to done. Doing active trading right now for the next few weeks is a really good opportunity for seeing normal volume and low volume for the end of year holidays. Open up a new text file and start taking notes about the possibilities I've mentioned, volumes, and the problems you haven't mentioned in the post. Also write down dates for interesting chart patterns and things that go right and pitfalls that go wrong. This text file will become your build journal. If you look at my various indicators, I'll mention the good and the bad. The journal is where this comes from and is very important. In the scattered notes in my journal, some of the separate variations of indicators were born out of this.